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OAH 15-1005-20454-2 |
STATE OF
OFFICE OF ADMINISTRATIVE HEARINGS
FOR THE DEPARTMENT OF COMMERCE
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In the Matter of the Mortgage Originator License Application of 1st Federal Housing Finance LLC |
FINDINGS OF FACT, CONCLUSIONS AND RECOMMENDATION |
A hearing was held on May 8, 2009, at the Office of Administrative Hearings by Administrative Law Judge Beverly Jones Heydinger, pursuant to the Notice of and Order for Hearing issued on April 7, 2009. The hearing record closed at the completion of the hearing.
Appearances: Michael J. Tostengard, Assistant Attorney General, appeared on behalf of the Department of Commerce (Department). Aaron M. Groshong, the Applicant, appeared on behalf of 1st Federal Housing Finance LLC.
Should a mortgage originator license be denied to 1st Federal Housing Finance LLC on the basis that its person in control, Aaron Groshong, has demonstrated untrustworthiness, in violation of Minn. Stat. § 58.12, subd. 1 (b)(2)(v).[1]
The Administrative Law Judge recommends that the decision to deny a Mortgage Originator License to Aaron M. Groshong be affirmed.
Based on the evidence in the hearing record, the Administrative Law Judge makes the following:
1. On December 16, 2008, Aaron M. Groshong submitted an application for a mortgage originator’s license in the name of 1st Federal Housing Finance. In his application, Mr. Groshong reported two criminal convictions, Assault, 3rd Degree, in 2003 and Controlled Substance, 1st Degree, in 2005.[2]
2. The Department verified the Applicant’s criminal history with the Bureau of Criminal Apprehension and reviewed copies of the criminal complaints and sentencing information.[3] It also received a letter from Mr. Groshong’s probation officer, stating that Mr. Groshong had completed all special conditions of probation, and that he remained on administrative probation until January 30, 2010.[4]
3. By letter dated January 7, 2009, the Department notified Mr. Groshong that his application would be denied because his two felony convictions and continuing probation demonstrated his untrustworthiness. The Department was also concerned that the inclusion of “federal” in the company name could be deceptive and misleading, applying operation on behalf of or with the authority of the federal government.[5] This was not cited as a separate basis for denial in the Notice of and Order for Hearing.
4. By letter dated February 6, 2009, Mr. Groshong appealed the Department’s denial of the license application and requested a hearing.[6]
5. The Department expressed its concern about the seriousness of the Applicant’s offenses, and the significant responsibility that a mortgage originator has for meeting with people, accessing personal and financial information about them, and handling large sums of money. Although the Department may be willing to reconsider an application after successful completion of the probationary period, at this time, the relatively recent offenses are evidence of Mr. Groshong’s untrustworthiness.[7]
6. Mr. Groshong freely admitted that he had committed serious offenses which he deeply regrets. In his defense, he pointed out that he was 19 and 21 years old at the time that he committed the offenses and that he has moved and built a new life. He has been treated for chemical dependency, regularly attends AA meetings and has held several positions in the financial services area in order to prepare himself for being a mortgage originator.[8]
7. Mr. Groshong provided several letters attesting to his efforts to change his life by taking classes, performing community service, gaining job experience, participating in business organizations, and living honestly and within the law. It is apparent that the individuals providing the letters are confident that he is professional and trustworthy. None of the letters appear to be written by former employers.
8. In an effort to address the Department’s concern about the company name, Mr. Groshong filed a company name change with the Secretary of State. The new name is 1st Minnesota Lending, LLC.[9] It is not apparent that this change would address the Department’s concern that the name implies the imprimatur of a government entity, but the Department did not cite the name as the basis for denying the license.
Based on these Findings of Fact, the Administrative Law Judge makes the following:
1. The Commissioner of Commerce and the Administrative Law Judge have jurisdiction to consider the appeal of the denial of a mortgage originator’s license to the Applicant.[10]
2. The Applicant received due, proper and timely notice of the time and place of the hearing and the basis for the Department’s action. This matter is properly before the Commissioner and the Administrative Law Judge.
3. The Department has complied with all relevant substantive and procedural legal requirements.
4. No person shall act as a residential mortgage originator or make residential mortgage loans without first obtaining a license from the Commissioner of Commerce.[11]
5. The burden of proof is on the Applicant to demonstrate by a preponderance of the evidence that he meets the criteria for a mortgage originator’s license.[12]
6. The Commissioner may deny a residential mortgage originator license if the applicant has “engaged in an act or practice, whether or not the act or practice involves the business of making a residential mortgage loan, that demonstrates untrustworthiness….”[13]
7. The Applicant has failed to demonstrate his trustworthiness by a preponderance of the evidence in light of his conviction for two felonies, one in 2003 and one in 2005, for which the Applicant remains under administrative probation until January 30, 2010.
8. Denial of the license at the present time is in the public interest.
Based upon these Conclusions, and for the reasons explained in the accompanying Memorandum, the Administrative Law Judge makes the following:
The Administrative Law Judge recommends that the decision to deny a Mortgage Originator License to Aaron M. Groshong be AFFIRMED.
Dated: May 29, 2009
s/Beverly Jones Heydinger
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BEVERLY JONES HEYDINGER Administrative Law Judge |
Reported: Digitally Recorded
This report is a recommendation,
not a final decision. The Commissioner
of Commerce will make the final decision after a review of the record. The Commissioner may adopt, reject or modify
the Findings of Fact, Conclusions, and Recommendations. Under Minn. Stat. § 14.61, the final decision
of the Commissioner shall not be made until this Report has been made available
to the parties to the proceeding for at least ten days. An opportunity must be afforded to each party
adversely affected by this Report to file exceptions and present argument to
the Commissioner. Parties should contact
the office of Glenn Wilson, Commissioner, Minnesota Department of Commerce,
If the Commissioner fails to
issue a final decision within 90 days of the close of the record, this report
will constitute the final agency decision under Minn. Stat. § 14.62, subd.
2a. In order to comply with this
statute, the Commissioner must then return the record to the Administrative Law
Judge within 10 working days to allow the Judge to determine the negative
licensing action, if any, to be imposed.
The record closes upon the filing of exceptions to the report and the
presentation of argument to the Commissioner, or upon the expiration of the
deadline for doing so. The Commissioner
must notify the parties and the Administrative Law Judge of the date on which
the record closes.
Pursuant to Minn. Stat. §
14.62, subd. 1 (2006), the Commissioner is required to serve his final decision
upon each party and the Administrative Law Judge by first class mail.
The Commissioner of Commerce has the authority to approve or deny an application for a mortgage originator’s license. The applicable statute sets forth several criteria to be applied in review of an application. In this instance, the Department denied Mr. Groshong’s application on the basis that he had demonstrated untrustworthiness, in violation of Minn. Stat. § 58.12, subd. 1(b)(2)(v). The Department based its determination on the Applicant’s two criminal convictions, Assault, 3rd Degree, in 2003 and Controlled Substance, 1st Degree, in 2005, for which the Applicant is still on probation, and also emphasized that he remains under probation for these offenses.
A residential mortgage originator often works in the privacy of individual homes, has access to private personal and financial data, and may negotiate large sums of money. A person who has a past history of drug abuse and assault may not be sufficiently trustworthy to bestow the privilege of the license at least until some reasonable period of demonstrated sobriety and law-abiding behavior. The Department’s position is that the application should be denied at least until such time as the Applicant has successfully concluded his probation. The probationary period will provide a reasonable period of time for the Applicant to demonstrate that he has significantly changed his behavior to the point where the Department has some certainty that the public can be adequately protected. The relative recency of two criminal felony offenses places the Applicant’s trustworthiness in doubt.
The Department is appropriately concerned that mortgage originators demonstrate scrupulous integrity and trustworthiness. In this instance, insufficient time has passed to assure the Department that the Applicant should be entrusted with a license.
Although it was not a basis for its decision, the Department continues to have concerns about the company name under which the Applicant seeks a license. In the event that the Applicant reapplies, he may wish to confer with the Department to be sure that he selects a name that addresses its concern that the name not imply affiliation with a governmental entity if none exists.
B. J. H.
[1] Minnesota Statutes are cited to the 2008 edition.
[2] Ex. 1.
[3] Exs. 2-6.
[4] Ex. 7.
[5] Ex. 8; Testimony (Test). of Robin Brown.
[6] Ex. 9.
[7] Test. of R. Brown.
[8] Test. of Aaron Groshong; Ex. 1.
[9] Exs. 15-17.
[10]
[11]
[12]
[13]