The Issue Whether or not Petitioner was subject to a discriminatory housing practice based on her race, age, and gender, or any of the foregoing, when her application for a loan was denied by Respondents.
Findings Of Fact Based on the testimony and demeanor of the witnesses and documentary evidence presented, the following Findings of Fact are made: Petitioner, Janice Buchanan, is an African-American female who was 44 years old at the time she applied for the home loan which is the subject of this claim. She had served on active duty in the United States Air Force and, as a result of her service, was eligible for a home loan guarantee by the federal Department of Veterans Affairs ("VA") if she met other financial criteria established by the VA. At all times material to the claim herein, Town & Country Mortgage Company ("Town & Country") was a correspondent mortgage lender. A correspondent mortgage lender originates a loan application for an individual seeking a loan, locates an investor, and, if the investor approves the applicant, assigns the file to the investor. As a correspondent mortgage lender, Town & Country did not make loans or make the decision whether or not to approve a loan application. The decision whether to approve the loan is made by an underwriter employed by the investor. The investor's underwriter, not Town & Country, decides whether an application for a VA home loan guarantee meets the criteria established by the VA. A Town & Country loan application commences with the "pre-qualification" interview. During this interview, the loan officer will obtain the applicant's income information, asset information, and look at a quick "snapshot" of the applicant's credit history, which is obtained from a credit reporting agency. Once the loan officer believes sufficient information has been obtained during the pre-qualification interview, the loan application is actually filled out by the applicant and the loan officer, and the applicant provides the loan officer with documents such as bank statements and income verification documents. While processing the loan application, the loan officer attempts verification of the information provided by the applicant during the initial interview. Once the loan application is completed, a loan processor with Town & Country will begin a more detailed verification of financial information which includes calling the applicant's employer, ordering a "full factual credit report," and verifying all financial information the applicant has provided. If the loan applicant has a complex financial history, the verification process may take a considerable amount of time. In the instant case, the "full factual credit report" was obtained from Stateswide Credit Bureau Services, Inc. ("Stateswide"). Stateswide assembles credit information on the loan applicant from the three main credit information repositories in the United States (Equifax, TransUnion, and TRW). The "full factual credit report" is known as a "tri- merge," i.e., credit information from all three credit information repositories is combined into one document. A "tri- merge" report is used because one credit information repository may not have all of the information another repository has. As a result, even if an applicant produced a satisfactory credit report from one credit information repository, it would be insufficient to overcome an unsatisfactory report on a "tri- merge." Petitioner's "full factual credit report" included at least nine negative credit references. A negative credit reference may be a delinquent account, a past due account, late payments or other activities considered inappropriate by a credit provider and reported to a credit information repository. The Stateswide "full factual credit report" was prepared by Laura Aguayo on November 2, 1999. In compiling the report, Ms. Aguayo telephoned each creditor which had provided negative credit information. Each creditor verified the negative information by social security number, in addition to name. If a creditor did not accept Ms. Aguayo's telephone call, she wrote the creditor. Petitioner was advised of the negative credit information; she provided Town & Country with additional information in an effort to explain the negative information on her credit report. After the verification process is completed, Town & Country's loan processor forwards the information obtained during the loan application and verification process to the investor. This information includes the loan application completed by the applicant and a credit package consisting of the applicant's credit report, income, assets, property, collateral, and additional information, e.g., the loan applicant's explanation of negative credit information, which was forwarded in the instant case. The investor's underwriter reviews the loan application and related information and makes a decision as to whether or not the investor will provide the loan. Town & Country would not forward a loan package to an investor if Town & Country did not want the application to be approved by the investor. There is an economic incentive for Town & Country to want a loan application to be approved by an investor; if an investor approves a loan, Town & Country receives a commission; if an investor does not approve a loan, Town & Country receives no income from the investor. The investor in the instant case was Irwin Mortgage Corporation ("Irwin"); the underwriter at Irwin who reviewed Petitioner's application was Ms. Christine Ross who, like her employer, has no affiliation with Town & Country. Ms. Ross has 15 or 16 years of underwriting experience. Ms. Ross reviewed Petitioner's income and assets and assessed whether she has the ability to make the payments and reviewed her credit history to determine if Petitioner had, in the past, made payments in a timely fashion. Ms. Ross determined that Petitioner was not credit worthy because of a poor credit history and insufficient funds to close the loan. In addition, Ms. Ross considered that Petitioner had several checks returned because of insufficient funds. She reviewed all of the information provided and opined that the application would not meet VA guidelines. If the loan is not approved by an investor, Town & Country's loan officer will work with the applicant to determine what can be done to have the loan approved. When dealing with a VA loan, as in this case, the loan application and related information can be forwarded to the VA for review even though it has not been approved by an investor. The benefit of having the package forwarded to the VA is that the VA might see something the investor missed, and provides the applicant with a second chance to have the loan approved. Town & Country would not request that the investor forward the loan file to the VA if it did not want the loan application to be approved. If the VA denies the loan, there is no purpose in trying to find another investor for the loan because by denying the loan application, the VA is indicating it will not accept the loan application from any investor. When Irwin advised Town & Country that Petitioner's loan application had been denied, Town & Country requested that Irwin forward the application directly to the VA. Upon Town & Country's request, Ms. Ross sent the loan package to the VA. If the VA had decided to guarantee the loan, Irwin would have no risk and would approve the loan. The VA also denied Petitioner's loan application. The reason the VA denied the loan was because "[t]he present income of the borrower(s) was not shown to be sufficient." Ultimately, Ms. Aguayo of Stateswide was able to remove one negative entry from Petitioner's credit report, but she was unable to remove any others. This deletion of one negative entry is evidenced by a December 17, 1999, Stateswide "full factual credit report." Had Ms. Ross been in possession of the December 17, 1999, credit report from Stateswide, this would not have affected her decision to deny Petitioner's loan application, because the report still showed a credit history that did not meet VA guidelines. Additionally, the VA denied the loan because of insufficient income, not poor credit. No credible evidence was presented that Town & Country caused a delay in seeking financing or provided false information as alleged in Petitioner's Petition For Relief. Steve Pilchick, President of Town & Country, had no direct involvement with Petitioner's loan application and did not discriminate against her. No evidence was offered regarding any discrimination against Petitioner based on her age. No evidence was presented that Town & Country was responsible for the denial of Petitioner's loan application. Nor was any evidence presented that Town & Country had approved loans for any particular person or persons of any race or gender who had loan qualifications similar to Petitioner.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Florida Commission on Human Relations dismiss Petitioner's Petition for Relief with prejudice finding that neither Town & Country Mortgage Company nor Steve Pilchick unlawfully discriminated against Petitioner. DONE AND ENTERED this 4th day of April, 2002, in Tallahassee, Leon County, Florida. JEFF B. CLARK 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 4th day of April, 2002. COPIES FURNISHED: Janice Buchanan 4266 Cloverleaf Place Casselberry, Florida 32707 Janice Buchanan Teamesha Leyva 14901 Newland Street, Apartment C Midway City, California 92655 Denise Crawford, Agency Clerk Florida Commission on Human Relations 2009 Apalachee Parkway, Suite 100 Tallahassee, Florida 32301 Daniel P. O'Gorman, Esquire Ford & Harrison LLP 300 South Orange Avenue, Suite 1300 Orlando, Florida 32801 Cecil Howard, General Counsel Florida Commission on Human Relations 2009 Apalachee Parkway, Suite 100 Tallahassee, Florida 32301
Findings Of Fact At all times pertinent to the allegations contained herein, Respondent was a licensed Mortgage Broker and the principal broker for Mortgage Associates of Countryside, located at 2623 Enterprise Rd., Clearwater, Florida. The Department was and is the state agency charged with regulating the activities of mortgage brokers in this state. In September, 1987, Andrew Grosmaire and Kevin Gonzalez, compliance officer and financial examiner, respectively, for the Department, pursuant to a complaint from Mark Snyder, conducted an examination of Respondent's affairs as they pertained to his operation as a mortgage broker. During the survey, which covered the period from August, 1986 through August, 1987, Mr. Grosmaire and Mr. Gonzalez examined between 50 and 60 loan files which had culminated in loan closings. In addition, they examined loan files which did not result in closings, bank account records, and other of Respondent's miscellaneous records. In order for an appropriate audit of a closed loan file to be conducted, it is imperative that the loan closing statement be included. Without it, the examiner cannot accurately determine what, if any, closing costs the borrower actually paid and if closing costs paid were consistent with those disclosed by the broker on the Good Faith Estimate Form at the initial interview. Of the closed loan files reviewed, these closing statements were missing from seven files. Respondent admits that several closed loan files did not have the required closing costs statement form enclosed. He attributes this, however, to the failure of his processor, an assistant, to place the closing statement in the file. They were not presented at hearing or thereafter. The investigators examined the Good Faith Estimate Forms in those files which culminated in loans and found that the form utilized by the Respondent failed to contain language, required by statute, which summarized the limits and conditions of recovery from the Mortgage Brokerage Guaranty Fund. Respondent contends that the pertinent statutory section was not in existence at the time he was engaged in mortgage brokerage activities. This was found to be not true. The Act became effective July 1, 1986 and the files surveyed were from the period August, 1986 through August, 1987. Examination of the Good Faith Estimate Forms used by the Respondent in each of the cases which culminated in loan closing revealed that Respondent consistently underestimated closing costs. This resulted in the borrowers generally paying higher closing costs than was initially disclosed to them. On -loans applied for by Mr. and Mrs. Snyder, Mr. Iyer, and Mr. Toland. Respondent redistributed loan points to himself in an amount higher than that which was agreed to by the parties. In the Toland case, Mr. Toland agreed to pay a 1% loan origination fee in the amount of $996.00. The settlement statement dated approximately 2 months later reflected that Toland paid Respondent a loan origination fee of $1,128.00 in addition to a 1% ($664.00) loan discount fee to the lender. This latter mentioned discount fee was not disclosed in advance to Mr. Toland on the estimate form nor was the excess loan origination fee charged. It should be noted here that a second Good Faith Estimate Form, dated nine days after the original, reflecting a 3% loan origination fee, was found in the file. Though signed by Respondent, this second form was not signed by the borrower as required. It cannot, therefore, serve to support Respondent's claim that he advised the Tolands of the higher cost by this second form. There is no showing that the Tolands were aware of it. In the Iyer case, the estimate form dated September 19, 1986 reflected a points and origination charge of $1,332.50 which is 1% of the mortgage loan amount of $133,250.00. The Iyers were subsequently approved for a mortgage in the amount of $145,600.00. The closing statement dated March 6, 1987, almost six months later, reflects that the Iyers paid a 2% loan origination fee of $2,740.00 to Mortgage Associates and a load discount fee of $685.00 to the lender. Here again the Respondent claims that a second cost estimate form reflecting a 2% point and origination fee of $2,912.00 was subsequently executed by the Iyers. However, this second form, found in Respondent's files, is undated and fails to reflect the signature of either Respondent or the Iyers. It cannot, therefore, serve as proof that the Iyers were made aware of the change. It does appear, as Respondent claims, that the bottom of the second form, (here, a copy) , was excluded from the copy when made, but there is no evidence either in the form of a signed copy or through the testimony of the Iyers, that they were aware of the change. Consequently, it is found that the Iyers had not been made aware of the second estimate and had not agreed to pay as much as they did, in advance. As to the Snyder closing, both Mr. Snyder and Respondent agree that it was their understanding at the time the loan was applied for, that Respondent would attempt to obtain a lower interest rate for them than that which was agreed upon in the application and in the event a lower rate was obtained, Respondent's commission points would remain the same as agreed upon in the brokerage agreement. In that case, as Respondent points out, his commission is based on the mortgage amount, not the interest rate, and he would be entitled to the agreed upon percentage of the loan face amount regardless of the interest rate charged by the lender on the loan. The Snyders had agreed to a 1% commission to Respondent plus a 1% loan origination fee to the lender. When the lender agreed to lend at par, without an origination fee, Respondent appropriated that 1% to himself, thereby collecting the entire 2% called for in the application. This was improper. Respondent's claim that it is an accepted practice in the trade is rejected. The Snyders initially made demand upon the Respondent for reimbursement of that additional 1% and ultimately had to hire an attorney to pursue their interests. Respondent subsequently made a $400 partial reimbursement payment of the amount owed but nothing further notwithstanding the fact that the Snyders ultimately secured a Judgement in Pinellas County Court against him for $1,082.52 plus interest, attorney's fees and costs. As a result, the Florida Mortgage Brokerage Guarantee Fund will reimburse the Snyders for their loss. According to the investigators, the Snyders Toland, and Iyer files, in addition to the problems described, also reflected that Respondent received payments for other items which should have gone into an escrow account. These included such things as credit reports and appraisal fees. The Department requires that any money received by a broker other than as commission, be placed in the broker's escrow account pending proper disbursement. Respondent did not have an escrow account. Mr. Gonzalez looked at Respondent's overall operation, including closed files, in an attempt to correlate between income and outgo to insure that Respondent's operation was in compliance with the statute. In addition to his search for an escrow account, Mr. Gonzalez also examined Respondent's "Loan Journal" which by statute is required to contain an entry for each transaction in each loan. The purpose of this journal is to provide a continuing record to show when each item in the loan processing was accomplished. In Mr. Gonzalez' opinion, the Respondent's journal was inadequate. It contained repeat and conflicting entries for specific items which hindered the investigators' ability to determine an audit trail. In addition, all required information was not put in the journal in complete form in each account. In the opinion of the investigators, the Respondent's violations were significant in that they made it impossible for the Department to determine compliance with statutes and Department rules and inhibited the compliance examination. All in all, Respondent's way of handling his accounts, his failure to maintain an escrow account, and his unauthorized increase in commission income, all indicated his actions were not in the best interest of his clients. The investigators concluded that clients funds were not being handled properly and that the purpose of Chapter 494, Florida Statutes, to protect the consumer, was not being met. In Mr. Gonzalez' opinion, Respondent's method of business constituted incompetence as a mortgage broker and "possibly" fraudulent practice. It is so found. Both Mr. Gonzalez and Mr. Grosmaire indicated they had extreme difficulty in attempting to locate Respondent after the complaint was filed by Mr. Snyder, in order to conduct their examination. They finally located him at a site different from that which appeared in the records of the Department. Respondent contends that the Department had been notified in writing within the required time, of his change of location when he filed a notice of fictitious name. He contends that after filing his notice of name change, he received no response from the state but took no action to inquire whether the change had been made. In any case, his current address was in the phone book and had the agents chose to look there, they would have found him. Respondent contends that the good faith estimates required by the statute are just that, an estimate, and that actual figures may vary from and exceed these estimates. This is true, but there is a procedure provided whereby the broker is to notify the client of a change in advance and if the change exceeds a certain amount, it may constitute grounds for voiding the contract. In paragraph 7 of the complaint, Petitioner alleges that Respondent used a form for the estimates which failed to contain a statement defining the maximum estimated closing costs. Review of the statement offered herein reflect this to be a fair analysis. However, Respondent claims that certain items cannot be predicted accurately in that some companies charge more than others for the same item and it was his practice to insert in the estimate portion of the form a "worst case scenario." However, at no time did he address in his form what could be the maximum a prospective purchaser might be expected to pay. Respondent "doesn't like" the total picture painted by the investigators concerning his operation. He claims it is cot a fair and accurate representation. In many cases, he claims, he expended funds on behalf of clients in excess of that he received in either commission or reimbursement and even though he may have received more than entitled in some cases, it "evens out over a period of time." Though this may be so, it is no way to do business. The state requires the keeping of accurate records and, just as the broker should not be required to assume responsibility for other than his own misconduct, neither should the client be required to pay more than is his legal obligation. Respondent professes to know the mortgage business and he resents having his qualifications as a mortgage broker questioned. In his opinion, he has trained himself well and has acted in good faith on the basis of the information available to him at the time. He ignores the impact of the Judgement of the court in the Snyder matter because he feels it was "unilateral." He believes the law is designed to protect the client and he wants to know who protects the broker. It is for that very reason, he contends, that fees paid in advance are not refundable. Mr. Sample feels the Department should be more informative to the brokers and get the governing regulations updated more quickly. Respondent cherishes his license and claims he needs it to make a living. He went out of business once before, several years ago, because of bad business conditions, (the reason he uses for not complying with the court order), but did not declare bankruptcy because he wanted to go back into business and pay off the judgements against him. Though he has been back in business for several years, he has failed to make any effort to pay off any of his former creditors even though in his former operation, he improperly tapped his escrow account for other business expenses.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is, therefore: RECOMMENDED that the Respondent, Howard E. Sample's license as a mortgage broker in Florida be revoked. RECOMMENDED this 15th day of September, 1988 at Tallahassee, Florida. ARNOLD H. POLLOCK Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904)488-9675 Filed with the Clerk of the Division of Administrative Hearings this day of September, 1988. APPENDIX TO RECOMMENDED ORDER IN CASE NUMBER 88-2858 The following constitutes my specific rulings pursuant to Section 120.59(2), Florida Statutes, on all of the Proposed Findings of Fact submitted by the parties to this case. Insofar as Petitioner's submission refers to testimony of a witness, that is considered as a proposed finding of fact. FOR THE PETITIONER; Accepted and incorporated herein & 3. Accepted and incorporated herein 4. & 5. Accepted and incorporated herein Accepted and incorporated herein & 8. Accepted and incorporated herein Rejected as contra to the evidence A conclusion of law and not a finding of fact & 11a Accepted and incorporated herein Accepted Accepted and incorporated herein Accepted Accepted and incorporated herein - 18. Accepted 19. - 21. Accepted and incorporated herein Accepted & 24. Accepted and incorporated herein 25. & 26. Accepted and incorporated herein Accepted &-29. Accepted 30. - 34. Accepted and incorporated herein FOR THE RESPONDENT: Nothing Submitted by way of Findings of Fact COPIES FURNISHED: Elise M. Greenbaum, Esquire Office of the Comptroller 400 West Robinson St. Suite 501 Orlando, Florida 32801 Howard E. Sample 2465 Northside Drive Apartment 505 Clearwater, Florida 34621 Honorable Gerald Lewis Ccmptroller, State of Florida The Capitol Tallahassee, FL 32399-0350 Charles L. Stutts, Esquire General Counsel Department of Banking and Finance Plaza Level, The Capitol Tallahassee, FL 3 2399-0350
The Issue The Respondents have been charged with multiple violations of Chapter 494, (1987), the Florida Mortgage Brokerage Act, and administrative rules promulgated pursuant to the act. The violations, described in an amended administrative complaint dated April 16, 1990, are as follows: Rule 3D-40.006(5), F.A.C.: Respondents failed to issue a statement signed by both parties, when receiving a deposit on a mortgage loan, regarding disposition of the deposit and other matters. Section 494.08(10), F.S. and Rule 3D-40.091(2), F.A.C.: Respondents failed to provide a written statement with a summary of limits and conditions for recovery from the Mortgage Broker Guaranty Fund. Section 494.055(1)(b), F.S. and Rule 3D-40.008(1), F.A.C.: Respondents assessed fees for credit reports, phone calls, appraisals and courier services, which fees were not supported by the files. Section 494.055(1)(0), F.S. and Rule 3D-40.006(4), F.A.C.: The department had to issue a subpoena for compensation records. Section 494.055(1)(g) and (p), and Section 494.08(5), F.S.: Borrowers were required to pay higher closing costs than were disclosed on the good faith estimate form. Section 494.08(5), F.S.: Respondents failed to secure executed modified mortgage loan applications from the borrowers or to return excess monies to the borrowers. Section 494.08(5), F.S. and Rule 3D-40.091(1), F.A.C.: Respondents accepted deposits from loan applicants but failed to obtain executed mortgage broker agreements which would disclose the cost of the loans. Sections 494.055(1)(b) and (g), and Sections 494.093(3)(a), (b), (c), and (4), F.S.: Respondents failed to disclose that they would retain both origination fees and discount points as their compensation, and failed to disclose compensation received from the lender in addition to brokerage fees assessed the borrowers on the closing statements. Section 494.055(1)(b), F.S., Section 494.08(5), F.S. and Sections 494.093(3)(a), (b), (c) and (4), F.S.: Respondents collected a servicing release fee from the borrowers when the Respondents were not the lender, and failed to disclose the collection. Section 494.055(1)(e), F.S. and Rule 3D-40.006(b)(a), F.A.C.: Respondents failed to maintain an escrow account.
Findings Of Fact Inlet Mortgage Company, Ltd. ("IMC") is a mortgage brokerage business operating under license #HB65002147500. Its place of business is 700 Virginia Avenue, Suite 105, Ft. Pierce, Florida 34982. John Davis is the principal mortgage broker of Respondent IMC, operating under license #HA246700273. He has been licensed in Florida since approximately 1987, and opened his business in February 1988. As authorized by Section 494.065(1), F.S. (1987), the Department of Banking and Finance ("department") conducted an examination of the affairs of the Respondents for the time period February 1988 through June 1, 1988. The examination was completed on July 5, 1988, with a written report. At the time of the examination Respondents had closed only four loans and had another six in progress. The audit was conducted because a loan processor working for IMC had applied for her mortgage broker license, and her application seemed to imply that she was already practicing mortgage brokering. The audit cleared up this question and the processor was not found to be operating improperly. However, Timothy Wheaton, the department examiner, found other violations by IMC. When an audit or review is conducted by the department, the agency staff first interviews the person in charge to explain the review and to learn about the company. The staff then looks at the licenses, reviews files of closed and active loans, and examines books and accounts, payroll records, and the like. Generally, a sampling of loan files is selected from the broker's loan log, but in this first review all loans were reviewed, as so few existed. The staff writes a preliminary report and conducts an exit interview to let the broker know its findings. Later, a formal report is completed and provided to the broker, who has thirty days to respond. Timothy Wheaton conducted his review of IMC and John Davis at the company office in Ft. Pierce on June 3, 1988 and June 7, 1988. At some point on June 3rd, Wheaton was reviewing compensation records to determine how the broker, his partner and the loan processor were paid. Davis had checkbooks available, but the accountant had not prepared his books as the office had just opened. Wheaton had questions as to whether the checkbooks were all that was available; when he asked for the payroll records, Davis told him he would have to subpoena them. Wheaton returned on Monday with a subpoena and was given the same records as before. Davis admits that he made the demand for the subpoena. He was piqued because he was very busy when the audit staff arrived, and when he suggested they return later, he felt they wrongfully impugned his motives and accused him of hiding something. Respondent Davis has admitted to several "technical" violations or oversights in the loan files at the time of the first review. A summary of the limits and conditions of recovery from the Mortgage Brokerage Guaranty Fund was not being provided, but has been provided since the first audit. Deposits for credit report, appraisal fees and other costs were collected from the borrowers, but the files did not include a statement, signed by the borrowers, describing disposition of the funds in the event that the loan was not consummated, or the term of the agreement. After the first audit Davis has provided such a form statement and has included it in each file. On three closed loans, and one that was still pending, the files did not include documentation to support minimal (i.e., $25.00, $10.00, $6.56) fees for phone calls and courier fees, or fees were collected which exceeded the documentation in the file. Davis explained that these are charges made by the closing attorney, and the files now document those expenses. The difference between what was collected for a credit report and what was spent was returned to the borrower. (For example, $20.30 was returned to borrower, G. Stewart). In three loans closed at the time of the first audit, Davis and IMC received as compensation both the origination fee and a portion of the discount points. In the McCurdy loan, IMC received its 1 percent origination fee ($600.00), plus one half of the 1 percent discount fee ($300.00). In the Alexander loan, IMC received its 1 percent origination fee ($469.00), plus a .75 percent discount fee ($351.75). In the Stewart loan, IMC received its 1 percent origination fee ($612.00), plus 1/2 percent discount fee ($306.00). In each case, the Good Faith Estimate form provided to the borrowers disclosed the fees separately and did not break out which portion of the loan discount would be paid to the lender and which portion would be paid to IMC. The origination fee is sometimes called the broker's fee, although some banks also collect the fee when a mortgage broker is not involved. Discount points are a one-time payment to a lender to increase its yield on the loan. They are a percentage of the loan, paid up front, to reduce the interest rate over the term of the loan. These are distinctly different forms of charges to the borrower. Davis claims that he explained orally to each borrower how much compensation he would receive. The borrowers do not remember the specifics of that explanation, but rather consider the total origination fee and discount fee as their cost of the loan. They knew that the broker was going to be compensated for his services and understood that compensation would come from those fees in some unspecified manner. Davis claims that he checked with some lenders who told him that it was standard practice for part of the broker's compensation to be called a "discount" fee. He considered it a tax advantage to the borrower, as discount fees could be deductible, just as interest is deductible. During the audit, Davis discussed his compensation practice with the agency staff, who explained that, whatever it is called, the broker's compensation had to be fully disclosed to the borrower at the time of application on the Good Faith Estimate form. Between June 3rd and June 7th, Davis attempted to redisclose his compensation to the borrowers, but this resulted in unsigned disclosure forms in the file when the agency review staff returned on June 7th to complete the audit. At the time of the first audit, Davis and IMC maintained an escrow account for the deposits received from applicant/borrowers for audit reports, appraisal fees and other costs. Davis later closed his escrow account because he felt it was costing him money and because he did not consider the funds he received at the time of application to be escrow deposits. In most cases, the credit report and appraisal and other relevant services were ordered the same day as the loan application. Whether the loan was eventually consummated, the customer was still responsible for paying the charge if the services were provided. This is disclosed in a statement at the bottom of the Good Faith Estimate form and in a separate "Notice to Borrower", signed by the applicant which, since the first audit, is maintained in the loan file. According to the Notice to Borrower, if the loan is cancelled or denied, and the services have not been performed, the funds will be returned to the customer, less any cancellation charge by the appraisal or credit firm. These funds are deposits. When the escrow account was closed, Davis deposited the money for appraisals and credit report in his operating account. After services were rendered and an invoice received, he would pay the bill. Barbara Janet (Jan) Hutchersien, conducted the department's second audit of IMC in January 1990. This review covered the period from July 1, 1988 through December 31, 1989. John Davis provided the boxes of loans and bank records and loan log. The auditor used the logs to review a sample of loans from each lender with whom IMC works. The bank records were used to trace funds reflected in the loan files. Ms. Hutchersien found, and noted in her examination report, that no escrow account was maintained, although deposits were received in a sample of loan applications. In the Fishman loan, which closed on 4/11/89, closing costs were disclosed by IMC as $1,822.00 on the Good Faith Estimate form dated 1/12/89, yet those costs actually amounted to $2,075.00, disclosed at closing on the U.S. Housing and Urban Development (HUD) Settlement form, for a difference of $253.00. In determining consistency between a good faith estimate and actual closing costs, the agency staff looks at items which are predeterminable costs. In the Fishman case, the estimate for survey was $225.00, but the actual cost was $400.00, due, according to John Davis, to an oddly-shaped lot. In two loans financed by Greentree Mortgage Corporation, IMC received a substantial fee from the lender, which fee was not disclosed on the Good Faith Estimate form, on the HUD Settlement form, or anywhere in writing to the borrower. File documents call these fees "discount for pricing". In the Meslin loan, closed on 8/11/89, the fee from the lender to broker was $432.00; in the Krueger loan, closed on 7/21/89, the payment was $820.00. These paybacks are called "par plus pricing", a relatively new (within the last five years) form of loan pricing. Par plus pricing allows a borrower who does not wish to pay cash at closing, but who would qualify for a higher interest rate in terms of monthly payments, to avoid paying discount points fee at closing. Instead, the lender pays the points to the broker, and the borrower gets a higher interest rate. This is contrasted with the discount point system where the borrower pays cash points at closing in return for a lower interest rate. Par plus pricing can work to the advantage to all parties: The borrower avoids a large cash outlay at closing, the lender enjoys a higher interest rate over the term of the loan, and the broker receives his money from the lender. The borrower, however, should understand his options, including the option to pay cash at closing for a lower interest rate. Davis did not disclose the payback from the lender in writing because that is the way he says he was told to handle the loan by Greentree's representative. Davis told the borrowers that he was getting his money from the lender. He did not, however, explain that the borrower would be paying a higher interest rate in return, and Roger Krueger did not understand why his loan was at 10 1/4 percent, rather than 9 3/4 percent, which he thought was the going rate at the time of closing. IMC also received funds from the lender in the Barnes loan, closed on 12/30/88. Cobb Financial Partners was the original lender, yet they paid IMC a service release fee ordinarily paid by one lender to another for release of servicing a loan. Although the fee from Cobb to IMC was not disclosed in writing to the borrowers, the Barnes' were told that the fee for IMC's services would come from the lender, rather from them. They were told, and it is disclosed on the Good Faith Estimate form, and on the HUD Settlement Form, that Cobb Partners Financial was paid $900.00 (1.25 percent loan discount) by the borrowers. Of this, $810.00 was returned by Cobb to IMC. John Davis concedes that Cobb, not IMC, was the lender and was not "comfortable" with how Cobb told him to handle his fee. He has not done business with Cobb since this loan and was simply trying to avoid having to charge his fee to Barnes, who had just arrived in town to become the newspaper editor. The borrowers who were the subject of the files in which the agency found violations generally did business with Davis and IMC because they thought he would get the best deal for them. They were financially unsophisticated and trusted him to represent them. They understood that he was being paid for his services and felt that he should be paid. Except for Mr. Krueger, they were generally satisfied with their mortgage rates. The mortgage broker's fiduciary responsibility is to the borrower, rather than the lender, although he must deal fairly and honestly with the lender. The service that the broker provides to the borrower is his knowledge and his ability to shop for the best product. Par plus pricing and other mechanisms by which the broker receives his fee in whole or part from the lender are not considered by the department to be a violation of standards governing the practice of mortgage brokerage, so long as the customer is fully apprised of his options and is informed of the role of those payments in the product or service they are receiving. The Barnes' and Kruegers clearly were not so apprised, nor does the record establish that the Meslins were informed, although they did not testify. Categorizing brokerage fees or compensation as "discount points" is patently misleading, as discount points are used to buy down an interest rate. When the points are diverted instead to the broker, the consumer does not receive the loan for which he has paid. John Davis admits certain technical violations, but unequivocally denies that he wilfully misled his customers or committed fraud. Since the second audit, he has restored his escrow account. He now discloses his compensation as brokers fees rather than discount points, and has learned how to disclose in writing the par plus pricing loans. In considering certain violations as "technical", and in recommending a penalty in this case, the undersigned has considered Respondents' willingness to correct the errors addressed by the department and Respondents' inexperience at the time of the first audit. Although he was involved in banking, insurance, and accounting, John Davis had not practiced mortgage brokering before moving to Florida and starting his business. In his early practice, as evidenced by his own testimony, he was willing to rely on the advice of lenders, rather than to seek guidance from his licensing authority. He misconceived his role as being jointly responsible to the borrowers and lenders with whom he worked, rather than a primary fiduciary duty to the borrowers, his clients. Although the concealment of compensation as discount points was a willful misrepresentation, the record establishes a pattern of ignorance, albeit inexcusable, rather than fraud.
Recommendation Based on the foregoing, it is hereby, RECOMMENDED That a Final Order be entered, finding that Respondents violated Sections 494.055(1)(e), (o), and (q), F.S. (1987); Sections 494.08(5) and (10), F.S. (1987); and Section 494.093(4), F.S. (1987), and imposing a penalty of $1,000.00 fine, and one year probation, with the conditions that Respondent Davis successfully complete a specified amount and type of professional short course work and undergo periodic review and supervision by the agency. DONE AND RECOMMENDED this 30th day of July, 1990, in Tallahassee, Leon County, Florida. MARY CLARK, Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904)488-9675 Filed with the Clerk of the Division of Administrative Hearings this 30th day of July, 1990. APPENDIX The following constitute specific rulings on the findings of fact proposed by the parties. Petitioner's Proposed Findings of Facts Rejected as unnecessary. Adopted in paragraphs 3 and 6. Adopted in paragraphs 5 and 6. Rejected as redundant. - 8. Rejected as unsupported by the weight of evidence except as found in paragraph 6. The department was required to obtain a subpoena due to Respondents' feigned or real refusal to produce certain records. Rejected as unnecessary. Adopted in substance in paragraph 13. Adopted in substance in paragraph 7. Adopted in substance in paragraph 7. - 18. Rejected as unnecessary. Adopted in summary in paragraph 8. Rejected as immaterial. The telephone charges were incurred by the closing agent, not Respondents. Rejected as unnecessary. Rejected as contrary to the weight of evidence. Rejected as unnecessary. Adopted in summary in paragraph 7. and Rejected as unnecessary and - 48. Adopted in summary in paragraph 8. 49. - 52. Adopted in summary in paragraph 14. Adopted in paragraph 15. Rejected as unnecessary. Adopted in paragraph 13. and Rejected as unnecessary. Adopted in paragraphs 16 and 20. 59 - 74. Adopted in summary in paragraphs 16-19. Rejected as unnecessary. The conclusion that the handling of "par plus pricing" was fraudulent is rejected as contrary to the weight of evidence. 77. - 81. Adopted in summary in paragraphs 20 and 21. 82. Rejected as contrary to the weight of evidence. 83. Adopted in paragraphs 10 and 12. 84. Adopted in paragraph 10. 85. - 89. Rejected as unnecessary. 90. Adopted in paragraph 22. 91. - 93. Rejected as unnecessary. 94. Adopted in part in paragraph 26. Respondent's Proposed Findings of Fact Adopted in paragraphs 1 and 2. Rejected as unnecessary. Adopted in paragraph 6. Rejected as contrary to the weight of evidence. Adopted in paragraph 3. Adopted in paragraph 13. - 9. Adopted in summary in paragraph 7. Rejected as contrary to the evidence. Liability for payment occurs when the service is rendered, as reflected in Respondent's "Notice to Borrower". Rejected as unnecessary. Adopted in paragraph 12. Rejected as unnecessary and immaterial. Rejected as unnecessary. - 19. Adopted in summary in paragraph 8. 20. - 22. Rejected as unnecessary. Adopted in paragraph 14. Adopted in substance in paragraph 13. Adopted in substance in paragraph 16. Adopted in substance in paragraph 19. Rejected as unnecessary. - 29. Rejected as contrary to the weight of evidence. Included in conclusion of law number 9. Rejected as immaterial. - 33. Rejected as contrary to the evidence. The terms implied that the loans would be at a discounted rate, but were not, because the "discount" (partial) went to the broker. Adopted in paragraphs 19 and 20. Rejected as immaterial. COPIES FURNISHED: Elise M. Greenbaum, Esquire Office of the Comptroller 400 W. Robinson St., Suite 501 Orlando, FL 32801 John O. Williams, Esquire Renaissance Square 1343 East Tennessee St. Tallahassee, FL 32308 Hon. Gerald Lewis Comptroller, State of Florida The Capitol Tallahassee, FL 32399-0350 William G. Reeves General Counsel Dept. of Banking & Finance The Capitol Plaza Level, Rm. 1302 Tallahassee, FL 32399-0350 =================================================================
The Issue The issues in this matter are whether Respondent poses an immediate, serious danger to the public health, safety, or welfare, and, if so, whether Petitioner has cause to immediately suspend Respondent's loan originator license.
Findings Of Fact At all times relevant to this case, Respondent was licensed with the Office to conduct business as a loan originator in the State of Florida. Respondent holds certificate of licensure NMLS No. LO19773. As a loan originator in Florida, Respondent is governed by chapter 494. The Office is the state agency charged with licensing, regulating, and supervising loan originators in Florida pursuant to chapter 494. On March 24, 2015, Respondent was arrested for the following crimes by the Sarasota County Sheriff's Office: Occupied Burglary--pursuant to section 810.02(2)(a), Florida Statutes,3/ a first-degree felony; Battery on a person 65 years or older-- pursuant to section 784.08(2)(c), Florida Statutes,4/ a third-degree felony; and Simple Battery (two counts)--pursuant to section 784.03(1)(a)1.,5/ first-degree misdemeanors. On May 12, 2015, Respondent was charged with these crimes in Sarasota County, Florida, in Case No. 2015-CF-004817-NC. Respondent's criminal case is currently pending disposition in Sarasota County. At the final hearing, Respondent described her actions which led to her arrest on March 24, 2015.6/ The incident began with a dispute over money. According to Respondent, an individual allegedly stole $258.00 from Respondent's friend who was staying at her house. Respondent, together with the friend and three other individuals, drove to the suspected thief's house to demand the money's return. Upon arrival at the house, Respondent walked up to and knocked on the front door. Two individuals, the suspected thief and the suspected thief's mother, answered. The confrontation quickly became physical. Respondent claims that the suspected thief's mother started the fight by jumping on her from out of the front door. Rapidly, upwards of five individuals were involved in hitting, pushing, tackling, and wrestling. The scrum ranged from the front door to the house's garage. Respondent recounted that she was battered, punched, slammed to the ground, and beaten with a cane. (The cane-wielder was the suspected thief's grandfather, who is over 65 years old, which apparently led to Respondent's felony charge of battery on a person 65 years or older.) Respondent claimed she suffered injuries to her chin, neck, heart, and scalp. At the final hearing, Respondent testified that she did not enter the suspected thief's home. However, Respondent did admit that at some point during the encounter, she entered the open garage with the intent to access the house through the side door. (This action evidently led to Respondent's felony charge of burglary.) Eventually, the Sarasota County Sheriff's Office was called and responded. The fight broke up. No serious injuries were reported. No information was presented regarding the fate of the $258.00. Respondent testified that she did not start the fight. She claimed that because of her small frame, she was never a serious danger to anyone. Nevertheless, the Sarasota County Sheriff indisputably arrested Respondent for her alleged role in the altercation. As of the date of the final hearing, Respondent understood that she will have a court date in August 2015 for the pending criminal case. Based on Respondent's arrest, on April 8, 2015, the Office issued the Emergency Order. The Office issued the Emergency Order pursuant to sections 120.60(6) and 494.00255(8). The Emergency Order states that the Office found Respondent's activities posed an immediate and serious danger to the public welfare. The Emergency Order ordered Respondent to immediately cease and desist from engaging in the business of loans and any activities in violation of chapter 494 and Office rules. Through the Emergency Order, the Office suspended Respondent's loan originator's license, effective April 13, 2015. Respondent's loan originator license is suspended "until such time as [Respondent] complies with the terms of this order." As described in the Emergency Order, the Office determined that Respondent's actions that led to her arrest posed an immediate, serious danger to the public based on several factors. The Emergency Order declares that the Office found that an emergency suspension and a cease and desist order was necessary to protect Florida consumers from Respondent's "apparent unpredictable and irrational behavior." Furthermore, Respondent's "apparent volatility, unpredictability, and lack of impulse control" calls into question her "trustworthiness and character." The Emergency Order also states that "[c]ommitting felony battery over a financial matter demonstrates that Respondent lacks the character or general fitness necessary to command the confidence of the community." To emphasize the seriousness of the alleged crimes, the Office points to the fact that the felony burglary charge carries a possible maximum penalty of life in prison. The Office included provisions and terms in the Emergency Order to meet the fairness requirement of section 120.60(6). The Emergency Order contained detailed factual findings in order to adequately notify Respondent of the basis for the Office's intended action. The Emergency Order included a Notice of Rights which provided Respondent the point of entry to request an expedited administrative hearing pursuant to chapter 120 to contest the Emergency Order (which Respondent pursued in the present matter). The Emergency Order also informed Respondent of her opportunity to seek to stay the Office's action through an appellate proceeding under section 120.68. Further, the Emergency Order stated that Respondent's loan originator's license is subject to reinstatement, if the criminal charges are ultimately dismissed or not prosecuted. At the final hearing, Respondent conceded that she made the wrong decision to confront the suspected thief. She expressed that she was not thinking clearly at the time. Nevertheless, Respondent asserts that she is falsely accused and has done nothing wrong. She pleads to keep her license during the time it takes Sarasota County to process her criminal case. Respondent proclaims that she should be considered and treated as innocent of all charges up to and until such time as the allegations against her are proven. Respondent asserts that her loan origination business is her sole source of financial support. Based on the facts produced at the final hearing and further discussed below, the undersigned finds that the Office has not met its burden of demonstrating by clear and convincing evidence that immediately suspending Respondent's license to conduct business as a loan originator is an action "necessary to protect the public interest," as required by section 120.60(6)(b).
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Petitioner, Office of Financial Regulation, enter a final order rescinding the Emergency Order to Cease and Desist and Suspending License issued to Respondent, Frankie Damiano, on April 8, 2015. DONE AND ENTERED this 21st day of July, 2015, in Tallahassee, Leon County, Florida. S J. BRUCE CULPEPPER 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 21st day of July, 2015.
Findings Of Fact Upon consideration of the evidence adduced at the hearing, the Report of the hearing officer submitted on December 6, 1979, is hereby adopted and incorporated herein. It should be noted, however, that the total time and savings deposits for commercial banks in Collier County as of June 30, 1979, was $266,668,000 rather than $226,668,000 as indicated in the hearing officer's Report. The idea of establishing another savings and loan association in Naples originated with Robert E. Talley, a banker, and Allan L. McPeak, a lawyer. The name proposed for the new association is Marine Savings and Loan Association. No financial institution operating in Collier County at the time of the hearing had the word "Marine" in its name. All of the savings and loan associations in operation in Collier County at the time of the hearing had the word "federal" in their names. Applicant proposes to establish an office in downtown Naples, within a few blocks of several other financial institutions. Applicant has entered into a lease for the proposed facility, at an annual rental of $50,000, renewable for two three-month periods, during the pendency of Applicant's application. The lease provides for a ten-year term at an annual rental of $50,000, if the application is approved, with the option to renew for two additional five-year terms. The lease also contains an option to purchase which must be exercised within thirty-six months of opening or no later than March, 1983, whichever first occurs, at a purchase price of $600,000. In support of its application, Applicant caused an MAI appraisal to be prepared. According to the appraisal, the leased premises have a fair market value, as of March 14, 1979, of $433,000. According to a second, CCIM appraisal, also prepared at Applicant's instance, the property will be worth $632,400 as of February 26, 1982. Initially, Applicant plans to occupy the northern 4,285 square feet of the 6,700 square foot, single-story building it is leasing. Subleases with two tenants who are to occupy the southern portion of the building will be structured so as to provide additional space for expansion by Applicant. The leased premises include 43 parking spaces. Additional parking is available on adjacent streets. The site is easily accessible. Traffic conditions appear to pose no problems. The proposed savings and loan association would be a full service financial institution and expects to be competitive with the existing savings and loan offices in the primary service area (hereinafter PSA) with respect to interest rates and breadth of services. Some of the services that the proposed savings and loan association plans are a drive-in teller window, a night depository, safety deposit boxes, a walk-up window, extended hours on week days (from 9:00 a.m. to 6:00 p.m.), evening hours on Fridays (from 9:00 a.m. to 7:00 pm.), Saturday hours (from 9:00 a.m. to Noon), and safekeeping facilities. Most of the existing savings and loan associations in the PSA do not offer extended hours, drive-in teller windows or safekeeping facilities. The proposed PSA includes the populated portion of the city of Naples and segments of unincorporated Collier County to the north and east of the city. It is bounded on the north by Pine Ridge Road, 4.7 miles away; on the east by County Barn Road, 4.2 miles away; on the south by Gordon Pass and Holly Avenue, 3 miles away; and on the west by the Gulf of Mexico, .7 miles away. The PSA is roughly rectangular except for an indentation in the northeastern corner. Twelve savings and loan association offices now operate within the PSA. One savings and loan association has headquarters within the PSA. Four of the eleven branch offices in the PSA are limited facilities. The Protestant's main office is located 0.2 miles southeast of the premises Applicant has leased. Protestant has filed an application to relocate its main office to a site in unincorporated Collier County, 4.8 miles north of Applicant's proposed site and to make its present main office a branch office. One branch office is now located 0.2 miles southwest of the proposed site; three are between 1.3 miles and 2.0 miles from it; and one is 8.7 miles to the north. Except for the Protestant, no savings and loan association now operating in Collier County has headquarters in Collier County. There are 14 commercial bank offices, including five main banking offices and nine branch offices in operation within the PSA. Three of the five main bank offices are located within 0.3 miles of the proposed site; one is 2.6 miles away and another is 7.5 miles away. Of the branch offices, one is located one mile southwest of the proposed site; three are 1.3 to 2.0 miles from it; four are between 2.2 and 4.0 miles from it and one is 8 miles away. In addition, there are three approved but unopened branch offices which are to be located between 3.1 and 5.3 miles-from Applicant's proposed site. The main office of Security Trust of Naples, a non-deposit trust company, is located 0.3 miles southwest of Applicant's proposed site. Applicant proposed five million dollars as the initial capitalization for the savings and loan association. The capital accounts would initially consist of $1,500,000 common stock and $3,500,000 paid-in surplus. Eighteen percent of the stock of the proposed savings and loan association has been subscribed to by nine organizers. The remaining 82 percent has been subscribed to by more-than 400 members of the general public, mostly from the Collier County area. Applicant has estimated the permanent 1979 population of the PSA at 47,000. This represents an average annual rate of growth of 11.6 percent from the PSA's 1970 population of 23,000. Applicant estimates the County's 1979 permanent population at 77,900, the seasonal population of the PSA at between 12,000 and 14,000, and the seasonal County population at between 15,000 and 20,000. The Applicant estimated the combined permanent and seasonal populations of the County at between 92,900 and 97,900 and that of the PSA at between 59,000 and 61,000. The Applicant projects for the 1982 permanent population of the PSA a figure of 53,000, representing an average annual growth rate of 4.3 percent from 1979. According to data compiled by the Bureau of Economic and Business Research, Division of Population Studies, at the University of Florida, the population of Collier County on April 1, 1970, was 38,040; on July 1, 1979, 64,761; on July 1, 1977, 68,900; on July 1, 1978, 74,572. According to the same source, the population of Naples on April 1, 1970, was 12,042; on July 1, 1976, 17,425; on July 1, 1977, 17,437; and on July 1, 1978, 17,462. The population of unincorporated areas of Collier County, including Everglade City, according to the same source, was 25,998, on April 1, 1970; 47,336, on July, 1976; 51,463 on July 1, 1977; and on July 1, 1978, The population of Collier County grew at an average annual rate of approximately 11.7 percent between 1970 and 1976. Between 1976 and 1977, the County's population grew at a slower rate, viz., approximately 6.4 percent. The rate of growth increased to approximately 8.2 percent between 1977 and 1978. Between 1970 and 1976, the population of Naples grew at an annual average rate of approximately 7.5 percent. During the years 1976, 1977 and 1978, the population of Naples did not increase significantly. The population of the unincorporated areas of Collier County grew at an average annual rate of approximately 13.7 percent between 1970 and 1976, at a rate of approximately 8.7 percent between 1976 and 1977, and at a rate of approximately 11.0 percent between 1977 and 1978. Almost all (94.14 percent) of the population growth in the County between 1970 and 1978, was the result of net migration. Between 1970 and 1978, the proportion of Collier County's population older than 65 years of age increased from 14.0 percent in 1970, to approximately 17.5 percent in 1978. Recent unemployment data for Collier County show an unemployment rate of 10.2 percent for July, 1979 (revised), and 9.8 percent for August, 1979 (preliminary), in the County as compared to the state averages of 6.6 and 6.1 percent for the same months, respectively. The per capita personal income for Collier County was $6,905 in 1976, and $7,663 in 1977. The 11.0 percent increase from 1976 to 1977, is higher than the 9.8 percent increase in the state average for the same period. Collier County's averages were above the state averages of $6,101 in 1976, and $6,697 in 1977. The proposed board of directors would be composed of nine members, at least seven of whom are full-time Florida residents and at least eight of whom are United States citizens. Robert E. Talley, the proposed president and chief executive officer, has had extensive commercial banking experience. From 1964 to 1972, he served as vice-president and loan officer for the Manatee National Bank; from 1972 through 1973, he was senior vice-president of the National Bank of St. Petersburg; from 1973 through 1977, he was president, chief executive officer, and a director of the Community Bank of Homestead; and from 1977 to 1978, he was executive vice-president and branch manager of the National Bank of Collier County. Proposed director, Roland Erickson, served as president and director of the Guaranty Bank and Trust Company, Worcester, Massachusetts, from 1947 to 1964. Proposed director, Harold S. Smith, served as a director and member of the executive committee of the Bank of Everglades from 1948 through 1951. Proposed director, Hendry P. Albrecht, is president of Gale-Realty, Inc., which is involved in investments, including rental property. Although most of the proposed board of directors appear to be successful businessmen, none of them has had direct savings and loan association experience. On June 30, 1975, commercial banks in Collier County had total deposits of $245,086,000 of which $152,499,000 were time and savings deposits. On June 30, 1976, commercial banks in Collier County had total deposits of $301,664,000, of which $193,488,000 were time and savings deposits. On June 30, 1978, commercial banks in Collier County had total deposits of $369,928,000 of which $224,982,000 were time and savings deposits. On June 30, 1979, commercial banks in Collier County had total deposits of $423,365,000 of which $266,668,000 were time and savings deposits. In March of 1979, Protestant held more than three quarters of all moneys on deposit with savings and loan associations in Collier County. At that time, $141,996,000 was on deposit at the Protestant's home office; $10,890,000 at its Tamiami North branch, even though this office first opened in September of 1977; $26,989,000 at its Lely branch; $4,728,000 at its Tamiami South satellite; and $5,537,000 at its Golden Gate facility. In March of 1979, Coast Federal's Tamiami North branch held $56,667,000. On deposit at First City Federal's Tamiami North branch was $6,855,000 in March of 1979. At the same time, Gulf Federal's Fifth Avenue branch had deposits of $7,018,000. In March of 1979, First Federal of Fort Myers had $10,256,000 on deposit at its Tamiami North branch and $235,000 at its Olde Naples facility, which opened in February of 1979. Time and savings deposits in savings and loan associations and commercial banks in Collier County amounted to $552,839,000 in 1978, up 55.62 percent from 1976. At the time of the hearing, there was commercial activity in Naples and residential development, particularly to the north of the PSA. Some thirteen financial institutions were in operation in the western part of Collier County, north of Applicant's proposed site, at the time of the hearing. Applicant has projected savings deposits at the end of the first, second and third years of operation to be $10,000,000, $15,000,000 and $20,000,000, respectively. Applicant also presented a pro forma budget which projected net profit for the first three years to be $191,700, $256,000 and $319,100, respectively. The Deputy Comptroller, Gerri Raines Dolan, and the Director of the Division of Banking, Ryland Terry Rigsby, as advisory staff members to the Comptroller, reviewed the application and the Department's entire file relating to the application. They assisted and concurred with the Comptroller in the ultimate determination of the application.
Conclusions As set forth in Rule 3C-20.45, Florida Administrative Code, when an application for authority to organize and operate a new state savings and loan association is filed pursuant to Chapter 3C-9, Florida Administrative Code, it is the applicant's responsibility to prove that the statutory criteria warranting the grant of authority are met. The Department shall conduct an investigation pursuant to Subsection 665.031(3), Florida Statutes, which was done in this case, and then approve or disapprove the application in its discretion. This discretion is neither absolute nor unqualified, but is instead conditioned by a consideration of the criteria listed in Subsection 655.031(4), Florida Statutes, wherein it is provided that: The Department shall approve the application upon such terms and conditions as it determines necessary to protect the public interest or disapprove the application at its discretion, but it shall not approve such application, unless in its opinion: Public convenience and advantage will be promoted by the establishment of the proposed thrift institution; Local conditions assure reasonable promise of successful operation of the proposed thrift institution and those thrift institutions already established in the community; The proposed officers and directors have good character, sufficient financial standing, and adequate experience and responsibility to assure reasonable promise of successful operation of the thrift institution; and The proposed savings account capital and organization expense fund or capital stock subscriptions comply with the requirements of this chapter. and Subsection 665.051(1), Florida Statutes, wherein it is provided that, The name of every association shall include either the words "savings association" or "savings and loan association." If in the opinion of the Department, any one of the above criteria has not been met and cannot be remedied by the applicant, it cannot approve the application. An applicant can, however, take corrective action in most circumstances to meet the criteria set forth in Subsections 665.031(4)(c), or (d), and 665.051(1), Florida Statutes, if any of these are found to be lacking. For example, if all other statutory criteria are met, the applicant may increase capital, or make certain changes in the board of directors, or change the name, or alter the provisions for suitable quarters, because these factors, at least to some degree, are within its control. It is the Department's policy to allow applicants to make certain changes to meet these criteria if all other criteria are met; to do otherwise would be to subject applicants to unnecessary red tape. However, it is the Department's opinion that there is little, if anything, that an applicant can do to alter its ability to meet the criteria set forth in Subsections 665.031(4)(a) and (b), Florida Statutes, since applicants CANNOT readily change the economic and demographic characteristics of an area. Therefore, if either one or both of these criteria are not met, the Department cannot approve the application. For purposes of applications for authority to organize and operate a new state savings and loan association, Rule 3C-20.45(1), Florida Administrative Code, defines PSA as the "smallest area from which the proposed association expects to draw approximately seventy-five percent of its deposits. It should be drawn around a natural customer base, should not be unrealistically delineated to exclude competing financial institutions or to include areas of concentrated population." Based upon, traffic patterns, natural and manmade geographic barriers and the location of other existing offices of financial institutions in the area, the Department concludes that the Applicant's PSA is realistically delineated. It is the opinion and conclusion of the Department that public convenience and advantage will be promoted by the establishment of the proposed savings and loan association. Therefore, the criterion in Subsection 665.031(4)(a), Florida Statutes, IS met. As set forth in Rule 3C-20.45(2)(a), Florida Administrative Code, the location and services offered by existing savings and loan association offices in a service area are indicative of the competitive climate of the market and should be considered. Other financial institutions such as banks and credit unions may be considered competing institutions to the extent their services parallel those of a new savings and loan association. Also, the traffic patterns in the area, as well as the general economic and demographic characteristics of the area, must be considered in evaluating this statutory criterion. Because it is recognized that the establishment of a new savings and loan association ANYWHERE would promote the convenience and advantage for at least a few people, SUBSTANTIAL convenience and advantage for a SIGNIFICANT number of people must be shown; otherwise, a new savings and loan association could be justified for every street corner in the state. Clearly, such a result was not the legislative intent in regulating entry into the savings and loan association industry, nor is it in the public interest. Based upon the facts set forth above, the Department has determined that the establishment of the proposed savings and loan association will substantially increase convenience to a significant number of residents of the PSA. This is particularly true in view of the significant growth of the various financial institutions in the area since 1976, as well as the past and projected population growth in the PSA. The Protestant, which is the only other savings and loan association with a main office in Collier County, held more than seventy-five percent of all savings and loan deposits in the County in March, 1979. Consequently, the proposed institution will served as a needed competitive alternative. The site is easily accessible and traffic patterns are favorable. Furthermore, the Applicant intends to offer a variety of new services not generally offered by other financial institutions within the PSA. Therefore, the criterion of public convenience and advantage is met. It is the opinion and conclusion of the Department that local conditions do assure reasonable promise of successful operation of the proposed thrift institution and those thrift institutions already established in the community. Therefore, the criterion in Subsection 665.031(4)(b), Florida Statutes, IS met. As set forth in Rule 3C-20.45(2)(b), Florida Administrative Code, current economic conditions and, to a lesser extent, the growth potential of the area in which the new savings and loan association proposes to locate are important considerations in determining the association's probable success. Essential to the concept of thrift institution opportunity is that there does and will exist a significant volume of business for which the new savings and loan association can realistically compete. The growth rate, size, financial strength and operating characteristics of savings and loan associations and other financial institutions in the service area are also important indicators of economic conditions and potential business for a new savings and loan association. It is noted that the statutory standards require that " . . . local conditions ASSURE reasonable PROMISE of successful operation of the proposed thrift institution and those thrift institutions already established in the community . . ." (E.S.), NOT merely that local conditions INDICATE a POSSIBILITY of such success. Thrift institutions involve a public trust. Unlike private enterprise establishments generally, a savings and loan association operates on the public's capital and therefore, the Legislature has vested in the Comptroller the responsibility to protect that public interest. Furthermore, the failure of a savings and loan association, as opposed to private enterprise establishments generally, may have an unsettling effect on the overall economic welfare of the community and that is why the Florida Legislature and the United States Congress have imposed stringent requirements for the industry. This Department is responsible for enforcing this legislative standard. Public interest is best served by having a thrift institution system whereby new competition is encouraged where appropriate, yet, at the same time, ensuring that the financial resources of the residents in the community are stable and safe. That was the obvious intent of the Legislature in regulating entry into the thrift institution industry. The Applicant's estimated 1979 PSA population of 47,000 and its projections for the near future seem more than reasonable in view of the latest official estimates by the University of Florida. The population base is healthy, a balanced mixture of residents, local businessmen and commuters, with a steady recent history of growth and projections for significant future growth. Although there are other savings and loan offices already existing in or near the PSA, the Department has concluded that the total savings potential within the PSA will readily support a new institution. The Department further concludes that the extensive deposit and loan growth of the existing financial institutions within the PSA justifies the establishment of another competitive alternative. The increasing population, the high per capita income, and the business and residential mix of the PSA point to an expanding and stimulated economy in the PSA for the present as well as the near future. Clearly, these factors are conducive to assuring the reasonable promise of success for the proposed savings and loan association and for those thrift institutions already established in the community. It is the opinion and conclusion of the Department that the proposed directors, as a group, have good character, sufficient financial standing and responsibility, but do not have sufficient experience in the savings and loan field to assure reasonable promise of successful operation of the proposed association. Therefore, one of the criteria of Subsection 665.031(4)(c), Florida Statutes, IS NOT met. As set forth in Rule 3C-20.45(2)(c), Florida Administrative Code, the organizers, proposed directors and officers shall have reputations evidencing honesty and integrity. They shall have employment and business histories demonstrating their responsibility in financial affairs. At least one member of a proposed board of directors, other than the chief managing officer, shall have experience in the savings and loan field or in a business directly related thereto such as mortgage banking, real estate finance and commercial banking where real property lending has constituted an integral part of such banking experience. The organizers, proposed director's and officers shall meet the requirements of Sections 665.131 and 665.703, Florida Statutes, as applicable. A majority of the organizers and directors of a proposed thrift institution shall be, whenever possible, from the local community and shall represent a diversification of occupation and experience commensurate with the position for which proposed. Members of the initial management group, which includes directors and officers, shall require prior approval of the Department. Changes of directors or chief managing officer during the first year of operation shall also require prior approval of the Department. While it is not necessary that the names of proposed officers he submitted with an application to organize a new savings and loan association, the chief managing officer and operations officer must be named and their names submitted for departmental approval at least sixty (60) days prior to the association' opening. In addition, interlocking directorships involving existing financial institutions competitively near the proposed site of a new institution are discouraged. Such interlocking directorships could possibly restrict competition and create fiduciary problems. Although the proposed directors have, as a group, good character, sufficient financial standing and responsibility, none of the proposed directors has any direct experience in the savings and loan field. Only Robert E. Talley, as a proposed director, has demonstrated that he has the requisite related business experience by virtue of his background in commercial banking, real estate, and mortgage brokerage. Because the selection of directors for a proposed new savings and loan association is generally within an applicant's control, the Department wilt, in this case, allow the Applicant to remedy the above inadequacy in the proposed board of directors by the addition of one director with sufficient experience in the savings and loan field or in a business directly related thereto or by further demonstrating that one of the proposed board members already has the requisite related business experience. While the department has noted that Robert E. Talley has been proposed as the chief managing officer, the Department does not approve or disapprove an applicant's proposed chief managing officer until the association makes an application for insurance of its accounts. It is the opinion and conclusion of the Department that the proposed savings account capital and the organization expense fund or capital stock subscriptions comply with the requirements of Chapter 665, Florida Statutes. Therefore, the criteria of Subsection 665.031(4)(d), ARE met. As set forth in Rule 3C-20.45(2)(d), Florida Administrative Code, capital should be adequate to enable the new savings and loan association to provide the necessary services of promoting thrift and home financing to meet the needs of prospective customers. Capital should be sufficient to purchase, build or lease a suitable permanent facility complete with equipment. Generally, the initial capital (withdrawable savings for a mutual association applicant and total stock and paid-in surplus for a stock association applicant) for a new savings and loan association should not be less than $1.5 million in non- metropolitan areas and $2.0 million in metropolitan areas. To encourage community support, a wide distribution of stock ownership is desirable. A majority of the stock should be issued wherever possible to local residents of the community, persons with substantial business interests in the community, or others who may reasonably be expected to utilize the services of the association. Subscribers to five (5) percent or more of the stock may not finance more than fifty (50) percent of the purchase price if the extension of credit is predicated in any manner on the stock of the new association, whether or not such stock is pledged. Generally, all proposed stock for-a stock savings and loan association shall be subscribed to at the time the application is submitted to the Department. The organizers may initially subscribe to all proposed stock, but should disclose the anticipated amount of individual stock to be retained. It is the opinion and conclusion of the Department that the name, Marine Savings and Loan Association, meets the criterion of Subsection 665.051(1), Florida Statutes, and is not so similar as to cause confusion with the name of an existing financial institution. As set forth in Rule 3C-20.45(4), Florida Administrative Code, the Department will consider the possibility that a name similar to that of another financial institution may cause confusion in the minds of the public or be misleading and may deny the use of such name, with the exception of names specifically authorized under Subsection 665.051(1), Florida Statutes. The Department concludes that the name Maring Savings and Loan Association is not so similar as to cause confusion with the name of an existing financial institution. It is the opinion and conclusion of the Department that provision has been made for suitable quarters. Therefore, the provisions of Rule 3C- 20.45(6)(d), Florida Administrative Code, ARE met. As set forth in Rule 3C-20.45(6)(d), should temporary quarters be contemplated by an applicant until a permanent facility is completed, permission to open in temporary quarters may be granted, generally not to exceed one year. The permanent structure of a new savings and loan association should generally contain a minimum of 5,000 square feet unless the applicant satisfactorily shows that smaller quarters are justified due to the performance of certain auxiliary services off-premises. It shall be of sufficient size to handle the projected business for a reasonable period of time. The facility shall be of a nature to warrant customer confidence in the association's security, stability and permanence. Other pertinent factors include availability of adequate parking, an adequate drive-in facility if such is contemplated and possibilities for expansion. The Applicant presently plans permanent quarters in a building containing 4,285 square feet, which will have adequate parking and drive-in facilities. No temporary quarters are contemplated. Since adequate provision has been made for expansion up to 6,700 square feet, the Department considers that provision has been made for suitable quarters. It is the opinion and conclusion of the Department that the proposed acquisition of the association's proposed site has been fully disclosed and does not constitute an insider transaction. Therefore, the provisions of Rule 3C- 20.45(3) ARE met. Rule 3C-20.45(3), Florida Administrative Code, provides that any financial arrangement or transaction involving the organization of a proposed association and its organizers, directors, officers and shareholders owning five (5) percent or more of the stock, or their relatives, their associates or interests should ordinarily be avoided. Should there be transactions of this nature, they must be fair and reasonable, fully disclosed and comparable to similar arrangements which could have been made with unrelated parties. It is the opinion and conclusion of the Department that the provisions of Rule 3C-20.45(6)(e), Florida Administrative Code, have NOT been met. Pursuant to Rule 3C-20.45(6)(e), Florida Administrative Code, appraisals of land and improvements thereon shall be made by an independent qualified appraiser and be dated no earlier than six months from the filing date of the application. In those instances where the application involves a lease arrangement, the appraisal should be directed to the comparability of the proposed lease with other leasing arrangements for similar business property. The application involves a lease arrangement and, although the Applicant has submitted an acceptable appraisal as to the fair market value of the leased premises, it has not submitted an appraisal directed to the comparability of the proposed lease with other leasing arrangements for similar business property. However, since this is a criterion that is within the control of the Applicant, the Department may approve the application upon the condition that this deficiency is remedied.
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.
Findings Of Fact Developers Diversified Services Limited, an Ohio limited partnership (DDS) , entered into negotiations with petitioners with a view toward acquiring certain property owned by petitioners in Pasco County (the Santos tract) for use as part of a shopping center site. It was understood on all sides that the Santos tract would he unsuitable for this purpose without another, contiguous parcel which was owned by a bank. As a result of these negotiations, on April 23, 1974, petitioner Bay Crest Plaza, Inc. executed a deed to the Santos tract in favor of DDS. Respondent's exhibit No. 2. Attached to this deed are stamps reflecting payment of documentary stamp tax in the amount of seventy-five dollars ($75.00) and of documentary surtax in the amount of two hundred seventeen and one half dollars ($217.50). The remaining named petitioners executed a second deed to the same Santos tract in favor of DDS, on April 23, 1974. Respondent's exhibit No. 1. Attached to this deed are stamps reflecting payment of documentary stamp tax in the amount of six hundred seventy-five dollars ($675.00) and of documentary surtax in the amount of two hundred forty-seven and one half dollars ($247.50). Both conveyances (of the same property) were subject to an outstanding mortgage in favor of Mr. and Mrs. James L. Stevens in the original amount of one hundred thirty-one thousand two hundred fifty dollars ($131,250.00). On April 25, 1974, DDS executed a purchase money mortgage to secure payment of a promissory note in the amount of two hundred six thousand three hundred two and sixty-nine hundredths dollars ($206,302.69) , in favor of petitioners. The mortgage provided that "there is and will be no personal liability of the mortgagor. Respondent's exhibit No. 3. The deeds executed by petitioners in favor of DDS anci DDS' mortgage in favor of petitioners were all recorded in Pasco County on August 12, 1974, in the office of the clerk of the circuit court. There is no issue in the present case with respect to taxes due on account of the recording of any of these instruments. When it became clear that the bank was unwilling to sell the parcel DDS sought to buy from it, DDS reconveyed the Santos tract to petitioners by deed dated November 11, 1974. The deed from DDS to petitioners was filed in Pasco County in the office of the clerk of the circuit court on December 27, 1974. Attached to this deed are stamps reflecting payment of documentary stamp tax in the amount of thirty cents ($0.30) and of documentary surtax in the amount of fifty-five cents ($0.55). Thereafter, petitioners executed a satisfaction of the purchase money mortgage DDS had executed in favor of petitioners on April 25, 1974, and the satisfaction was filed in Pasco County in the office of the clerk of the circuit court on January 24, 1975.
Recommendation Upon consideration of the foregoing, it is RECOMMENDED: That respondent's revised notice of proposed assessment be upheld. DONE and ENTERED this 28th day of April, 1978, in Tallahassee, Florida. ROBERT T. BENTON, II Hearing Officer Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: Frank and Aniana Santos Frank and Ruby Johnson 36 Sandpiper Road Tampa, Florida 33609 Patricia S. Turner, Esquire Assistant Attorney General The Capitol Tallahassee, Florida 32304
Findings Of Fact During 1984 Philip Dennis on his own behalf and on behalf of Medi Fund Inc. negotiated in Florida with William Kickliter for the purpose of arranging a mortgage loan. During those negotiations Respondent Dennis represented to Kickliter that both he and Respondent Medi Fund, Inc., were mortgage brokers licensed by the State of Florida. In his stated capacity as a mortgage broker, Respondent Dennis drafted and entered into an agreement with Kickliter whereby Kickliter would obtain a mortgage loan from Respondent Medi Fund, Inc., for financing an ongoing business. Respondent Dennis signed the agreement between Kickliter and Respondent Medi Fund, Inc., pursuant to which Kickliter gave to Respondent Dennis a refundable advance fee of $1,500 by check made payable to Respondent Medi Fund, Inc. No mortgage loan was ever consummated. When Kickliter made demand on Respondent Dennis for the return of his monies, Respondent Dennis sent to Kickliter a post-dated check for only $850 with a notation on that check that it was allegedly for full payment of the refundable advance fee. When Kickliter deposited that check, the check "bounced." Respondent Dennis then stopped payment on the check. Kickliter's refundable advance fee has never been refunded to him by either Respondent Dennis or Respondent Medi Fund, Inc. In 1983 Respondent Dennis negotiated in Florida with Robert N. Goldstein to secure financing so that Goldstein's company Hospitality Consultants, Inc., could acquire a hotel. Respondent Dennis drafted and presented to Goldstein and Goldstein's partner Thomas Palumbo an agreement between Respondent Dennis and Hospitality Consultants, Inc., whereby Respondent Dennis would seek mortgage funding for the corporation. In that agreement Respondent Dennis designated himself as "the broker", a designation which matched his oral representations to Goldstein that he was a mortgage broker licensed in the State of Florida. Respondent Dennis executed that agreement on March 11, 1983, on his own behalf. In 1985 Respondent Dennis negotiated in Florida with Bryan Miller of Deco Redevelopment Corp. to secure real estate mortgage loan financing for hotels located in Miami Beach. Respondent Dennis on behalf of Respondent Medi Funds Inc., drafted an agreement whereby Respondent Medi Funds Inc. would secure financing for real estate renovation and new construction of a hotel complex to be built in Miami Beach. Respondent Dennis entered into that agreement on behalf of Respondent Medi Fund Inc. Pursuant to, that agreement, Miller paid to Respondent Dennis on behalf of Respondent Medi Funds Inc., the sum of $5,000 as a refundable advance fee. Neither Respondent Dennis nor Respondent Medi Funds Inc. has arranged any mortgage loan to Deco Redevelopment Corp. Furthers the $5,090 Refundable advance fee paid to Respondents Dennis and Medi Fund Inc. has never been refunded. In 1985 Respondent Dennis while in Florida negotiated with Millie Bulkeley of Arizona for mortgage loan financing for a mobile home park in Arizona. Thereafter Respondent Dennis drafted and entered into an agreement with Bulkeley whereby Respondent Medi Fund Inc., would secure real estate financing for her. Pursuant to that agreement Bulkeley deposited into Respondent Dennis's bank account in New York $20,000 as a refundable advance fee. No financing was ever secured for the project by Respondent Dennis or Respondent Medi Fund Inc. and the refundable advance fee has never been refunded. During 1983, 1984, and 1985 Respondent Dennis represented himself as being an officer of Respondent Medi Fund Inc. and misrepresented to persons both orally and in writing that both Respondent Dennis and Respondent Medi Fund, Inc., were mortgage brokers licensed by the State of Florida. During the time period of December 1982 up to and including May 2, 1986, neither Respondent Dennis nor Respondent Medi Fund, Inc., has been a licensed mortgage broker. By Order entered April 16, 1986, in this cause Petitioner was awarded certain costs against Respondent Medi Funds Inc., as a result of Medi Fund, Inc.'s, refusal to engage in discovery. Those reasonable costs are $45 for the attendance of the court reporter, $318.10 for the travel expense incurred by Petitioner's attorney, and $1,275 as an attorney's fee for Petitioner's attorney. The Order of April 16, 1986, also required Respondent Medi Funds Inc. to return to Petitioner the witness fee and mileage fee paid to it before its non-appearance at its scheduled deposition.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is, RECOMMENDED that a Final Order be entered finding Respondents Philip Dennis and Medi Fund, Inc., guilty of the allegations contained within the Cease and Desist Order filed herein ordering Respondents Dennis and Medi Fund, Inc. to forthwith and immediately cease and desist from any further violations of Chapter 494, Florida Statutes, requiring Medi Funds Inc. to return to the State of Florida the witness fee and mileage paid to it pursuant to the April 16, 1986 Order entered herein and requiring Respondent Medi Funds Inc. to pay to the State of Florida the sum of $1,638.10, as further required by the April 16, 1986 Order entered herein. DONE and RECOMMENDED this 29th day of August 1986 at Tallahassee Florida. LINDA M. RIGOT Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 29th day of August, 1986. COPIES FURNISHED: Gerald Lewis, Comptroller State of Florida The Capitol Tallahassee, Florida 32301 Deborah Hoffman, Esquire Thomas E. Glick Esquire Office of Comptroller 401 N.W. 2nd Avenue, Suite 870 Miami Florida 33128 Philip Dennis 2124 Northeast 167 Street North Miami Beach, Florida 33160 Medi Funds Inc., a Florida Corporation c/o Philip Dennis 2124 Northeast 167 Street North Miami Beach, Florida 33160
Findings Of Fact Based upon the evidence adduced at hearing, and the record as a whole, the following Findings of Fact are made: Petitioner is a Florida corporation headquartered in Boca Raton, Florida. William Kirschner is Petitioner's owner and chairman of the board. Stacey Interlandi is its President and principal broker. Petitioner is in the mortgage lending and brokerage business. All of the mortgage loans it makes are sold to investors. Petitioner held an active mortgage brokerage business registration (No. HB 592567137 00) issued pursuant to former Section 494.039, Florida Statutes, which was effective from September 1, 1990, until its expiration on August 31, 1992. 2/ It currently holds a mortgage brokerage business license (No. MBB 592567137 000) issued pursuant to Section 494.0031, Florida Statutes. The effective date of this license was September 1, 1992. The license expires on August 31, 1994. From October 1, 1989, through September 30, 1991, Petitioner acted as a seller or assignor of mortgage loans and/or a servicer of mortgage loans. Since October 1, 1991, Petitioner has made mortgage loans by advancing funds to mortgage loan applicants. With respect to each of these loans, however, the commitment to advance funds was made prior to October 1, 1991. Since October 1, 1991, Petitioner has sold or assigned mortgage loans to non-institutional investors, but for no monetary gain. Since October 1, 1991, Petitioner has serviced mortgage loans pursuant to agreements into which it entered prior to October 1, 1991. At no time has Petitioner been licensed as a mortgage lender pursuant to Chapter 494, Part III, Florida Statutes. On or about July 31, 1991, the Department sent the following written advisement concerning the revisions made by the 1991 Legislature to Chapter 494, Florida Statutes, to all registered mortgage brokerage businesses, including Petitioner: The 1991 Legislature revised Chapter 494, Florida Statutes, effective October 1, 1991. A copy of the new law is enclosed. Some of the changes which affect mortgage brokerage businesses are: A mortgage brokerage business may not make (fund) loans or service loans. Only mortgage lenders and correspondent mortgage lenders may make (fund) loans. Only mortgage lenders may service loans. A mortgage brokerage business may ONLY act as a mortgage broker. "Act as a mortgage broker" is defined as: "... for compensation or gain, or in the expectation of compensation or gain, either directly or indirectly, accepting or offering to accept an application for a mortgage loan, soliciting or offering to solicit a mortgage loan on behalf of a borrower, or negotiating or offering to negotiate the terms or conditions of a mortgage loan on behalf of a lender." There are no net worth requirements for mortgage brokerage businesses. A principal broker designation form must be completed and maintained in the principal place of business and a branch broker designation form must be completed and maintained at each branch. The required forms will be sent to your office prior to October 1, 1991. To act as a mortgage broker, a licensed individual must be an associate of a licensed brokerage business and is prohibited from being an associate of more than one mortgage brokerage business. "Associate" is defined as: ". . . a person employed by or acting as an independent contractor for a mortgage brokerage business . . ." Under the new law, no fee or notification to the Department is required when a mortgage broker becomes an associate of your business. However, the license of each mortgage broker must be prominently displayed in the business office where the associate acts as a mortgage broker. Note: The Department will discontinue processing change of status requests under the current law effective August 1, 1991. Mortgage brokerage businesses in good standing which hold an active registration are eligible to apply for licensure as a mortgage lender pursuant to the saving clause. The applicant must have: For at least 12 months during the period of October 1, 1989, through September 30, 1991, engaged in the business of either acting as a seller or assignor of mortgage loans or as a servicer of mortgage loans, or both; Documented a minimum net worth of $25,000 in audited financial statements; Applied for licensure pursuant to the saving clause before January 1, 1992 and paid an application fee of $100. Should you meet the above requirements and wish to apply for licensure as a mortgage lender pursuant to the saving clause or if you wish to apply for licensure as a mortgage lender pursuant to Section 494.0061, please contact the Department for the appropriate application. These applications will be available in early September 1991. THESE CHANGES ARE EFFECTIVE OCTOBER 1, 1991. PLEASE REVIEW THE ENCLOSED COPY OF THE LAW CAREFULLY FOR OTHER CHANGES WHICH MAY AFFECT YOUR MORTGAGE BROKERAGE BUSINESS. As promised, application forms for licensure as a mortgage lender were available the first week of September, 1991. Petitioner requested such an application form on September 18, 1991. The requested form was mailed to Petitioner the following day. On December 31, 1991, Petitioner submitted a completed application for licensure as a mortgage lender pursuant to the "saving clause," Section 494.0065, Florida Statutes. The application was accompanied by an application fee of $100.00 and an audited financial statement reflecting that Petitioner had a net worth in excess of $25,000.00. At the time of the submission of its application, Petitioner had an unblemished disciplinary record.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is hereby RECOMMENDED that the Department enter a final order granting Petitioner's application for licensure as a mortgage lender pursuant to the "Saving Clause." DONE AND ENTERED in Tallahassee, Leon County, Florida, this 18th day of November, 1992. STUART M. LERNER Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 18th day of November, 1992. APPENDIX TO RECOMMENDED ORDER IN CASE NO. 92-4313 The following are the Hearing Officer's specific rulings on the findings of facts proposed by the Department: 1-7. Accepted and incorporated in substance, although not necessarily repeated verbatim, in this Recommended Order. 8. Rejected because it is more in the nature of a statement of the law, albeit an accurate one, than a finding of fact. 9-12. Accepted and incorporated in substance. 13. Rejected because it is more in the nature of a statement of the law, albeit an accurate one, than a finding of fact. 14-15. Accepted and incorporated in substance. 16. Rejected because it would add only unnecessary detail to the factual findings made by the Hearing Officer. 17-21. Accepted and incorporated in substance. 22. Rejected because it is not supported by persuasive competent substantial evidence. 24 6/-39. Rejected because they would add only unnecessary detail to the factual findings made by the Hearing Officer. 40. Rejected because, even if true, it would have no bearing on the outcome of the instant case.
