ALJDEC

99F-BD009-BNK · State Banking Department · 1998-11-10

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: November 10, 1998.

APPEARANCES: The Arizona State Banking Department (herein called the “Department”) was represented by Assistant Attorney General, W. Mark Sendrow, Esq.

Respondent, United Financial Mortgage Corp. (herein called “UFMC”) failed to properly appear at the scheduled hearing.

ADMINISTRATIVE LAW JUDGE: Robert. I. Worth _____________________________________________________________________

Evidence and testimony were presented, and based upon the entire record, the following Findings of Fact, Conclusions of Law and Recommended Order have been prepared and are hereby submitted by the undersigned Administrative Law Judge for review, consideration, approval and adoption by the Superintendent of the Department (herein called the “Superintendent”).

FINDINGS OF FACT

1. Approximately one hour prior to the time that the administrative hearing in this matter was set to convene, pursuant to advance notice duly sent to all parties, a request for a continuance by or on behalf of the above-named Respondent was communicated to the tribunal. Not only was such request untimely, but it was purportedly made by an individual who was not shown to have been a proper legal representative for Respondent. Under all the circumstances, the requested continuance was denied and the scheduled hearing went forward.

2. The uncontroverted evidence established that Respondent, UFMC had been issued a mortgage banker’s license by the Department on September 5, 1997. Pursuant to applicable statutory provisions, such license was required to be renewed on or before March 31st of the following year, and on the same date each year thereafter. If a renewal application was not timely filed by the licensee and granted by the Department, the license would be suspended by operation of law, and if renewal was not completed prior to the end of a 30-day grace period, the suspended license would expire, necessitating the applying for and obtaining of a separate new license.

3. It was similarly undisputed that Respondent did not timely renew its license, which therefore expired on April 30, 1998, and has not to the present day obtained another license as a mortgage banker in this State.

4. Respondent, UFMC, was shown to be a corporate entity having its principal offices in the State of Illinois. The Arizona license that was issued had, by appropriate amendment, designated a local resident as the responsible individual for all business operations and activities within this State and also reflected that the Phoenix mailing address of the named responsible individual was to be used as the Arizona address of record for Respondent. A separate application together with the payment of an additional fee was statutorily required in the event a branch office at another location was to be opened and utilized. Such authorization by the Department was shown to have been obtained by Respondent for the transaction of business from a branch office located in Tucson, Arizona.

5. Credible testimony indicated that Respondent had also opened and maintained a branch office in Scottsdale, Arizona and that it engaged in mortgage banking business activities from that location, in which Respondent had its own employees and a branch manager. It further appeared that no application for another branch location had been filed by Respondent with the Department and no authorization to conduct mortgage banking operations from such location was ever granted.

6. In mid-February, 1998, in advance of the above-described deadline date, written notice had been sent by the Department, together with renewal application forms, to Respondent at its Phoenix address of record, effectively reminding the license holder of the need to renew prior to the end of March, 1998. In mid-April, 1998 a further written communication was directed to Respondent, also at its Phoenix address of record, confirming that the license was suspended and would expire if a late renewal was not accomplished before the end of the statutory grace period.

7. On May 11, 1998, the Department sent another letter to Respondent, at its Illinois headquarters address, expressly notifying the corporate entity that its Arizona mortgage banker license had expired as of April 30, 1998 and that until such time as a new license was applied for and issued, Respondent may not conduct business as a mortgage banker in this State.

8. Highly credible testimonial evidence from former employees as well as documentary evidence from Respondent’s business records demonstrated that the mortgage banking activities of Respondent continued without interruption not only after its Arizona license was suspended but also long after such license had expired. Moreover, this impermissible functioning remained ongoing in the two Arizona locations despite a showing that both the responsible local individuals and corporate officials in Illinois were fully aware of the unlicensed status of the company.

9. The activities of Respondent during and after the suspension of its license and after the expiration of same are found and determined to have constituted the engaging in business as a mortgage banker. Included within the range of such activities were the advertising for and hiring of new loan personnel in both branch offices, the solicitation by brochures and pamphlets, mailed and delivered, of new financing and refinancing business from potential consumers and the taking and processing of numerous loan application forms, many of which were submitted together with monetary payments for credit report or appraisal fees.

10. Upon learning about the continuation of business operations by Respondent after the expiration of the license, one of the Department’s Examiners in late August, 1998 verbally advised one of Respondent’s officials of the expired license status and the inability to transact any mortgage banking business. The Department promptly

issued to and served on Respondent a formal written Cease and Desist Order dated September 3, 1998. The contents of the Order set forth in summary form essentially the same factual findings described above and admonished Respondent to discontinue all such impermissible functioning. Additionally, paragraph 2 of the proposed Order required that Respondent shall pay to the Department a civil money penalty in the amount of $20,000.00. The instant hearing was timely requested by Respondent.

11. The evidence at the hearing tended to indicate that Respondent, through its corporate officials and local managers, did not comply with the advice from the Department’s Examiner nor the mandates of the Cease and Desist Order but instead continued to operate as a mortgage banker, including the transaction of business from an unauthorized branch location, after service of such Order and after having been made aware of that Order’s contents. The course of conduct attributable to Respondent reflects a willful and flagrant disregard of the State’s banking laws and the directives of the Department, as well as of the expectations and trust of the individual consumers dealing with the then-unlicensed Respondent.

12. By failing to properly appear at the scheduled hearing of this matter, Respondent presented no evidence in defense or in mitigation of the within allegations and charges.

CONCLUSIONS OF LAW

1. Pursuant to the provisions of A.R.S. §6-137, the Superintendent has jurisdiction in this matter and is empowered to impose penalties against the holder of a mortgage banker’s license for proven violations of the State’s banking laws, Such penalties include the issuance of an Order to Cease and Desist from engaging in prohibited acts, practices and transactions and also includes the imposition of civil money penalties, if and as may be appropriate.

2. The undisputed evidence of record demonstrating Respondent’s continued conduct of a mortgage banker business without a valid, current license and the operation of a branch office without any license adequately established that Respondent has violated the provisions of A.R.S. §§ 6- 943(A); 6-944(D); and 6-947(B).

3. The entire record of this case fully supports the imposition pursuant to A.R.S.§ 6-132 of a civil money penalty against Respondent for its willful violations of the charged statutory provisions, the amount of which penalty appears to be not only reasonable and warranted but also even lenient under all the facts and circumstances.

RECOMMENDED ORDER

In view of the foregoing, it is recommended that the contents and requirements of the previously issued Cease and Desist Order be affirmed in their entirety by the Superintendent of the Department and that all of the terms of such Order shall remain in full force and effect.

It is additionally recommended that the Superintendent initiate and pursue such further enforcement action against Respondent as may deemed to be necessary or warranted.

Dated: November 18, 1998.

OFFICE OF ADMINISTRATIVE HEARINGS

_________________________________ Robert. I. Worth Administrative Law Judge

Original transmitted on _____________________

by: _____________________________ , to:

Richard C. Houseworth, Superintendent of Banks Arizona State Banking Department 2910 North 44th Street, Suite 310 Phoenix, AZ 85018

ATTN: June Beckwith -----------------------

Office of Administrative Hearings 1700 West Washington, Suite 602 Phoenix, Arizona 85007 (602) 542-9826