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OAH 16-1005-21884-2 |
STATE
OF
OFFICE OF ADMINISTRATIVE HEARINGS
FOR THE DEPARTMENT OF COMMERCE
|
In the Matter of the Cease and Desist Order Issued to Accurate Home Loans, Inc., d/b/a Accurate Home Loans Mortgage Originator Lic. No. 20352662 |
FINDINGS OF FACT, CONCLUSIONS AND RECOMMENDATION |
This matter came on for hearing before
Administrative Law Judge Manuel J. Cervantes at 9:30 a.m. on March 15, 2011, at
the Office of Administrative Hearings,
Christopher M. Kaisershot, Assistant Attorney General, appeared on behalf of the Minnesota Department of Commerce (Department). Errol Appel, owner of Accurate Home Loans (AHL or Respondent) appeared on his own behalf without counsel. Julie Appel also appeared.
STATEMENT OF ISSUE
Should
the Cease and Desist Order issued against Accurate Home Loans for failure to
pay an assessment required by Minn. Stat. §§ 45.027, subd. 7 (a)(2), and 58.12,
subd. 1 (b)(2)(x), and 2010
Based upon all of the files, records and proceedings herein, the Administrative Law Judge makes the following:
FINDINGS OF FACT
1.
Accurate Home Loans, Inc., is a residential mortgage
origination company owned and operated by Errol and Julie Appel. The company has been licensed in the State of
2.
In July of 2008, the federal government enacted a law that
required the states to license individuals engaging in mortgage loan
origination. Prior to this change,
federal and state law required only that companies engaging in mortgage loan
origination be licensed.[2]
3.
In 2010, based on the change in federal law, the Minnesota Legislature
enacted Minnesota Statutes, Chapter 58A, the “Minnesota Secure and Fair
Enforcement for Mortgage Licensing Act of 2010” (S.A.F.E. Act).[3] Effective July 31, 2010, the law requires the
licensure of individuals engaged in mortgage loan origination in
4.
To aid with the transition to licensing individual mortgage
loan originators in addition to mortgage loan origination companies, and to
conform with federal law and Chapter 58 of the Minnesota Statutes, the
Legislature extended the expiration date of mortgage loan origination companies’
licenses from July 31, 2011, to December 31, 2011, if licensees paid a prorated
transition fee of $200 by December 31, 2010.[5]
5.
The S.A.F.E. Act requires all individual mortgage loan
originators to be licensed and registered through the Nationwide Mortgage
Licensing System and Registry (NMLS).[6] To implement and administer this new
requirement and to participate in the NMLS, the Department paid $272,000 from
its budget to the Conference of State Bank Supervisors (CSBS).[7]
6.
The Legislature permitted the Commissioner of Commerce to
recover the costs paid to CSBS by levying a pro rata assessment on
The
commissioner shall levy the assessments and notify each institution of the
amount of the assessment being levied by September 30, 2010. The institution shall pay the assessment to
the department no later than November 30, 2010.
If an institution fails to pay its assessment by this date, its license
may be suspended by the commissioner until it is paid in full.[8]
7.
By memo dated August 30, 2010, the Department notified all
licensed residential mortgage originator and servicer companies of the change
in the law.[9] The Department explained that the transition
to NMLS would begin on October 1, 2010, and that all individual mortgage loan
originators were required to meet several requirements before a license would
be issued to the individual. The memo
gave website and contact information for both NMLS and the Department. The Department informed licensees that they
would be required to pay a one-time assessment to the Department by November
30, 2010, to cover the costs of joining NMLS.
At that time, the Department estimated that each licensed company would
be required to pay between $600 and $800.
The memo stated that any “licensee who fails to pay the assessment by
the due date may have their license suspended until the fee is paid in full.”[10] The memo also stated:
Mortgage
originator companies that have ceased to do business in 2010, or who plan to
discontinue operations, must contact the DOC in writing with a letter of intent
to surrender their license. Originators
must submit a plan for the withdrawal from operations, including a timetable
for dissolution of the business.[11]
8.
The Appels received this memo and made phone calls to the
Department in an attempt to better understand the new law. They were confused by how the S.A.F.E. Act
affected them since Mr. Appel was the only mortgage loan originator working for
the company.[12]
9.
On September 30, 2010, the Department sent a $600 invoice to
Accurate Home Loans for its share of the Department’s costs of joining NMLS.[13] The Department reiterated some of the
language from the August 30, 2010, memo about the new S.A.F.E. Act and explained
that all mortgage loan originator companies were being assessed the same
amount. The Department stated that if
AHL did not make its payment by November 30, 2010, its license may be suspended
by the Commissioner until the assessment was paid in full. The Department sent this invoice to more than
500
10.
Upon receiving the September 30, 2010, memo, the Appels made
additional phone calls to the Department in an attempt to understand how the
new law applied to their business.[15]
11.
The Department also posted information on its website
regarding the new licensing requirements in the S.A.F.E. Act and the one-time
assessment fee.[16]
12.
The Department sent out a three-page reminder memo to all
licensees detailing the new licensing requirements and the $600 assessment fee
on October 26, 2010.[17] The Appels deny receiving this particular
memo.[18]
13.
On November 30, 2010, Accurate Home Loans paid the $200 transition
fee and a $200 NMLS processing fee.[19]
14.
By memo to all licensed residential mortgage originators
dated December 9, 2010, the Department expressed concern that companies and
individuals engaging in mortgage loan origination would not complete the new
licensing requirements by December 31, 2010, and therefore, would not be able
to continue working in the industry as of January 1, 2011.[20] The memo explained that transition requests
had to be approved by December 31, 2010, and that such requests could not be
approved until the company has submitted a new surety bond and paid the $600 assessment
fee. Again, the Department stated that
it could suspend a company’s license for failure to pay the $600 assessment.[21]
15.
At no time after receiving any of these memos did the Appels
submit anything in writing to the Department.
The Appels spoke to staff members at the Department on numerous occasions
between August 2010 and March 2011.[22]
16.
As of January 2011, Accurate Home Loans had not paid the
$600 assessment fee to the Department.
As a result, on January 21, 2011, the Department issued a Cease and
Desist Order and Notice of Right to Hearing (Order) to Accurate Home Loans. The Order required AHL to stop acting as a
licensed residential mortgage originator in
17.
The Cease and Desist Order is the only negative action taken
by the Department against Accurate Home Loans since the company was licensed in
2002.[24]
18.
The Department issued approximately 100 Cease and Desist
Orders to residential mortgage originators due to nonpayment of the $600
assessment. Some of the licensees have
since paid the $600 assessment, and others have surrendered their
licenses. In each instance, the
Department did not vacate the Cease and Desist Order against the license.[25]
19.
On February 18, 2011, the Appels requested an administrative
hearing to appeal the Cease and Desist Order.
The Appels specifically requested that the hearing occur after March 10,
2011.[26]
20.
On March 1, 2011, the Department issued a Notice and Order
for Hearing in this matter, setting the hearing for March 15, 2011.
21.
In an email to the Department dated March 14, 2011, Mr.
Appel submitted documentation indicating that Accurate Home Loans was no longer
engaging in residential mortgage loan origination in
22.
Later that same day, the Department clarified with the
Appels that the Cease and Desist Order would not be vacated based upon the
surrender of the license. Based on this
information, the Appels decided to proceed with the hearing scheduled for March
15, 2011.[28]
23.
Mr. Appel has completed some of the requirements for
individual licensure. Within the next
two months, the Appels plan to move out of state and retire from the
residential home mortgage business.[29]
Based
upon the foregoing Findings of Fact, the Administrative Law Judge makes the
following:
CONCLUSIONS
1.
The Administrative Law Judge and the Commissioner of
Commerce are authorized to consider this matter under Minn. Stat. §§ 14.50, and
45.027, subd. 5a (b).
2.
The Respondent received due, proper, and timely notice of
the charges against it, and of the time and place of the hearing. This matter is, therefore, properly before
the Commissioner and the Administrative Law Judge.
3.
The Department has complied with all relevant procedural
legal requirements.
4.
The Commissioner is authorized to levy a pro rata assessment
on institutions licensed under Minnesota Statutes, Chapter 58, to recover the
costs to the Department for administering the licensing and registration
requirements of Minn. Stat. § 58A.10.
The levy was required to be issued by September 30, 2010, and payment
was due from licensees by November 30, 2010.[30]
5.
The Department issued the levy to Respondent for the $600
assessment in a timely manner. To date,
Respondent has not paid the $600 assessment fee.
6.
The Commissioner of Commerce may take action against the
license of a residential mortgage originator who fails to pay any fee or
assessment imposed by the Commissioner.[31]
7.
The Commissioner may take action against any person who
violates any laws, rules, or orders related to the duties entrusted to the
Commissioner, including issuing a Cease and Desist Order against the person’s
license.[32] A Cease and Desist Order issued under Minn.
Stat. § 45.027, subd. 5a, remains in effect until it is modified or vacated by
the Commissioner.[33]
8.
The Department properly issued a Cease and Desist Order
against Respondent for nonpayment of the $600 assessment fee.
9.
Affirmation of
the Cease and Desist Order is in the public interest.
10.
The conclusions
are reached for the reasons set forth in the attached Memorandum, which is
incorporated herein by reference.
Based upon the foregoing Conclusions, the Administrative Law Judge makes the following:
RECOMMENDATION
IT IS
RECOMMENDED: that the Commissioner of the Department of Commerce AFFIRM and
make permanent the Cease and Desist Order issued against Accurate Home Loans,
Inc.
Dated: March 31, 2011.
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s/Manuel J. Cervantes |
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MANUEL J. CERVANTES |
|
Administrative Law Judge |
Reported: Digitally Recorded
No transcript prepared
This
Report is a recommendation, not a final decision. The Commissioner of Commerce will make the
final decision after reviewing the record and may adopt, reject or modify these
Findings of Fact, Conclusions, and Recommendations. Under Minn. Stat. § 14.61, the Commissioner’s
decision shall not be made until this Report has been available to the parties
to the proceeding for at least ten (10) days.
An opportunity must be afforded to each party adversely affected by this
Report to file exceptions and present argument to the Commissioner. Within 15 days after
receiving this Report, the Commissioner shall issue a further order vacating or
making permanent the cease and desist order.
Parties should contact Michael Rothman, 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. 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. To comply with Minn. Stat. § 14.62, subd. 2a, the Commissioner must then return the record to the Administrative Law Judge within 10 working days to allow the Judge to determine the discipline to be imposed.
Under Minn. Stat. § 14.62, subd. 1, the agency is required to serve its final decision upon each party and the Administrative Law Judge by first class mail or as otherwise provided by law.
MEMORANDUM
Mr. and Mrs. Appel operate
Accurate Home Loans out of their home. They
are the sole employees of the business. Beginning
in August 2010, when the Appels received notice from the Department of the new
S.A.F.E. Act and its requirements, they were confused about how the new law
applied to their business. The Appels
made several phone calls to the Department for help in interpreting the new law. They claim that they could not get a straight
answer from anyone at the Department. Nonetheless,
Mr. Appel began to work toward completing the new requirements for his
individual licensure. He experienced a
setback when he had two emergency surgeries.
After the surgeries, Mr. Appel proceeded to take the required state and
federal licensure exams. He passed the
state exam only.
Because Mr. Appel was the only
mortgage loan originator in the company and he had not yet met the individual
requirements for licensure, the Appels believed they did not need to pay the
$600 assessment fee levied against Accurate Home Loans until Mr. Appel was
compliant with the new law. In addition,
the Appels were contemplating retirement and were considering surrendering the
Accurate Home Loans license and closing the business. The Appels claim that they would have
surrendered the license well before the Cease and Desist Order was issued if
the Department had given them better information in a timely manner.
The Appels are requesting that
the Cease and Desist Order be vacated.
While they plan to retire and move out of state, they wish to hold open
the option of being licensed again in the future. The Appels argue that a Cease and Desist
Order in their licensing history will prevent them from being able to do
business with lenders in the future.
The Department argues that once
a licensee complies with the terms of a Cease and Desist Order, the Order no
longer has regulatory force. Department
policy dictates that Cease and Desist Orders are not vacated, even if complied
with. The Order simply remains a part of
a licensee’s enforcement history.
According to the Department, Accurate Home Loans is seeking special
treatment by asking to have the Cease and Desist Order vacated.
While the new S.A.F.E. Act and
its requirements may have seemed overwhelming to the Appels as the owners of a
small business, the written information sent to Accurate Home Loans by the
Department was clear. Failure to pay the
$600 assessment fee could result in suspension of the company’s license. The Appels acknowledged receiving all but one
of these notices. Nothing in these
notices from the Department excused a company from payment of the $600
assessment pending individual licensure.
Accurate Home Loans was a
licensed mortgage loan origination company at the time the Department levied
the $600 assessment as permitted by the Legislature. The company did not pay the fee or surrender
its license in a timely manner.
Accordingly, there is no basis to vacate the Cease and Desist
Order. Nothing in the terms of the Cease
and Desist Order prevents the Appels from becoming licensed in the future,
should they choose to do so. For all of
these reasons, the Administrative Law Judge recommends that the Commissioner affirm
and make permanent the Cease and Desist Order issued to Accurate Home Loans.
M. J. C.
[1] Testimony of Julie Appel.
[2] 12 U.S.C. 5101-5116; Testimony of Robin Brown.
[3] Ex. 1 (Laws of Minnesota 2010, ch. 347, art. 4.)
[4] Ex. 1 (Laws of Minnesota 2010, ch. 347, art. 4, § 3, codified at Minn. Stat. § 58A.03, subd. 1.)
[5] Ex. 1 (Laws of Minnesota 2010, ch. 347, art. 5, § 7).
[6] Ex. 1 (Laws of Minnesota 2010, ch. 347, art. 4, § 11, codified at Minn. Stat. § 58A.10.)
[7] Test. of R. Brown.
[8] Ex. 2 (Laws of Minnesota 2010, ch. 215, art. 4, § 10).
[9] Ex. 3.
[10]
[11]
[12] Test. of J. Appel.
[13] Ex. 4.
[14] Test. of R. Brown.
[15] Test. of J. Appel.
[16] Exs. 7 and 8.
[17] Ex. 5.
[18] Test. of J. Appel.
[19] Ex. B.
[20] Ex. 6.
[21]
[22] Test. of J. Appel and Errol Appel.
[23] See, Cease and Desist Order and Notice of Right to Hearing attached to the Notice and Order for Hearing (March 1, 2011).
[24] Test. of R. Brown; Test. of J. Appel.
[25] Test. of R. Brown.
[26] See attachment to the Notice and Order for Hearing dated March 1, 2011.
[27] Ex. 9. See also, Ex. A.
[28] Ex. 10.
[29] Ex. A. Test. of J. Appel and E. Appel.
[30] Ex. 2 (Laws of Minnesota 2010, ch. 215, art. 4, § 10).
[31]
[32] Ex. 11 (Minn. Stat. § 45.027, subds. 5a and 7 (a)(2)).
[33]
Ex. 11 (