ALJDEC - Licensing

23A-009-FIN · Department of Insurance and Financial Institutions - Financial · 2023-05-15

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

In the Matter of the Mortgage Broker License of:

Phoenix Rising Financial, LLC

Arizona Mortgage Broker License No. 1002731

Respondent

No. 23A-009-FIN

ADMINISTRATIVE LAW JUDGE DECISION

HEARING: May 2, 2023

APPEARANCES: The Department of Insurance and Financial institutions was represented by Assistant Attorney General Zachary Howard.

ADMINISTRATIVE LAW JUDGE: Adam D. Stone

_____________________________________________________________________

Having heard the evidence and testimony and having considered the record in this matter, the undersigned Administrative Law Judge hereby makes the following Findings of Fact and Conclusions of Law and issues the following Recommended Order to the Director of the Department.

FINDINGS OF FACT

Background and Procedure

The Department was created and enabled by the State of Arizona to administer enumerated State laws by protecting the public interest through licensure and regulation of the consumer lender profession.

Respondent was a licensed Arizona mortgage broker and the holder of mortgage broker license number 1002731. Respondent’s mortgage broker license was issued by the Department on August 8, 2019. The license was most recently renewed on January 21, 2022, and was set to expire on December 31, 2023.

On Oct0ber 21, 2022, the Department sent Respondent a notification regarding a scheduled examination of Respondent’s business practices in Arizona.

After Respondent failed to respond to that notification, and two additional e-mails were sent to Respondent, one on October 28, 2022, and another on November 4, 2022.

The Department then sent Respondent several more e-mail communications on February 1, 9, and 15, 2023, requesting Respondent contact the Department immediately. On February 15, 2023, Respondent e-mailed the Department indicating that he would contact the Department by February 17, 2023.

After Respondent again failed to contact the Department as indicated, another follow up e-mail was sent on February 22, 2023, and again Respondent failed to respond.

On February 24, 2023, the Department’s Regulatory Legal Affairs Officer sent Respondent one last e-mail requesting an immediate response, as well as indicating that a failure to respond could lead to a license suspension or revocation.

While in the middle of the above efforts to have Respondent submit to examination, Respondent completed a renewal process through the Nationwide Multistate Licensing System & Registry. One of the requirements of the renewal process required the filing of Respondent’s bond certificate.

After review of the bond certificate, the Department determined that the Bond was invalid because it did not contain Respondent’s signature.

The Department’s licensing specialist sent multiple e-mails to Respondent on January 31, February 8 and 10, 2023, and Respondent failed to respond.

Finally, on February 16, 2023, the Regulatory Legal Affairs Officer sent an e-mail requesting an updated bond certificate.

The Department then referred this matter to the Office of Administrative Hearings, an independent state agency, for an evidentiary hearing on May 2, 2023. Per the Notice of Hearing issued on March 28, 2023, the issue to be determined was whether the Department had cause to revoke Respondent’s consumer lender license based on the foregoing alleged conduct.

Hearing Evidence

The Department called Richard Fergus and Michelle Castaneda as a witnesses and submitted Exhibits 1-21. The Notice of Hearing was also admitted as its own exhibit.

Mr. Fergus was a Senior Examiner with the Department and testified as to Respondent’s failure to submit to the examination.

Mr. Fergus testified to the above timelines and the email correspondence which was sent to Respondent and the general lack of response thereto. Also, Mr. Fergus testified that there were several voicemails left for Respondent which too went ignored.

Further, Mr. Fergus testified that he also attempted a site visit to Respondent’s address of record. Upon arrival, Mr. Fergus noted that the suite was occupied by a law firm and not Respondent. In addition, Mr. Fergus testified that he spoke with a receptionist who was unaware of Respondent conducting business in that location.

Finally, Mr. Fergus testified that when Respondent finally emailed him back on February 15, 2023, he reminded Respondent that there was a holiday and any response could be delayed. However, Mr. Fergus testified that Respondent never followed up as he indicated.

Michelle Castaneda was a Licensing Supervisor for the Department and testified as to the insufficient bond.

Ms. Castaneda testified that after reviewing Respondent’s bond, she noted that it did not contain the signature of Respondent’s representative.

Further, Ms. Castaneda sent an email to the bond company on March 8, 2023 to inquire as to validity of an unsigned bond, and the company responded that it would be invalid without Respondent’s signature.

Finally, Ms. Castaneda testified that as of today, Respondent has not updated his bond information.

In closing, the Department argued that because Respondent failed to submit to the examination and has failed to comply with the bond requirements, its license should be revoked.

Respondent failed to respond to the Notice of Hearing and while the tribunal waited ten minutes prior to the commencement of hearing, Respondent’s representative failed to appear at the hearing and present any evidence to defend its license.

CONCLUSIONS OF LAW

The Director of the Department is vested with the authority to regulate entities engaged in business as consumer lenders and has the duty to enforce statutes and rules relating to consumer lending. The matter was properly brought before Office of Administrative Hearings pursuant to Ariz. Rev. Stat. §§ 41-1092 et seq.

The Notice of Hearing the Department mailed to Respondent’s address of record is sufficient, and Respondent is deemed to have received notice of the hearing in this matter. Because the Department mailed all correspondence to Respondent in the same manner and failed to receive any mail returned as undeliverable, Respondent is deemed to have received all correspondence regarding this matter from the Department as well.

The Department bears the burden of proof to establish that cause to sanction Respondent’s license by a preponderance of the evidence. Respondent bears the burden to establish factors in mitigation of the penalty and affirmative defenses by the same evidentiary standard.

“A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.” A preponderance of the evidence is “[t]he greater weight of the evidence, not necessarily established by the greater number of witnesses testifying to a fact but by evidence that has the most convincing force; superior evidentiary weight that, though not sufficient to free the mind wholly from all reasonable doubt, is still sufficient to incline a fair and impartial mind to one side of the issue rather than the other.”

Here, the material facts are not in dispute. Respondent failed to submit to an examination by the Department. Examinations are required by Ariz. Rev. Stat. § 6-121, and Respondent failed submit to the same.

In addition, the lack of a fully executed bond by the licensee was a violation of Ariz. Rev. Stat. § 6-903(J).

Further, Respondent failed to maintain a principal place of business in violation of Ariz. Rev. Stat. § 6-904(H).

Therefore, the only issue remaining is whether Respondent raised a sufficient justification or excuse for failing to comply with the Department’s requests or correspond in a timely manner. This is an affirmative defense that Respondent bears the burden to establish. Because Respondent failed to appear and provide testimony, this burden has not been sustained. Respondent’s absence is a factor in aggravation. The record reflects that Respondent had no affirmative defense(s) for its inaction.

Because the Department established by a preponderance of the evidence that Respondent violated the above statutes, the Department has also established that grounds exist for discipline to be taken against Respondent’s consumer lender license, up to and including revocation per Ariz. Rev. Stat. § 6-905(A)(2) and (3).

RECOMMENDED ORDER

Based on the aforementioned Findings of Fact and Conclusions of Law,

IT IS RECOMMENDED that on the effective date of the Final Order in this matter, Respondent Phoenix Rising Financial, LLC, License No. 1002731, be revoked.

Pursuant to A.R.S. § 41-1092.08(I), the licensee may accept the Administrative Law Judge Decision by advising the Office of Administrative Hearings in writing not more than ten (10) days after receiving the decision. If the licensee accepts the Administrative Law Judge Decision, the decision shall be certified as the final decision by the Office of Administrative Hearings.

In the event of certification of the Administrative Law Judge Decision by the Director of the Office of Administrative Hearings, the effective date of the Order will be forty (40) days from the date of that certification.

Done this day, May 15, 2023.

/s/ Adam D. Stone

Administrative Law Judge

Transmitted by either mail, e-mail, or facsimile to:

Barbara D. Richardson,

Department of Insurance and Financial Institutions - Financial

Phoenix Rising Financial, LLC

2200 E Camelback Road, Suite 221

Phoenix, AZ 85016

[email redacted]

Zachary Howard

[email redacted]

By: OAH Staff