Minnesota Department of Commerce File No. 1-1003-14788-2
Considered and decided by Stoneburner, Judge; Kalitowski, Judge; and
1. Under the Minnesota Residential Originator and Servicer Licensing Act (Act), the Department of Commerce has jurisdiction over an employee of a licensee who performs mortgage origination services but who is exempt from the Act's licensure requirement.
2. The Department of Commerce does not infringe on an individual's property interest in private employment by prohibiting an individual found to have violated the Act from engaging in mortgage origination/servicing.
Relator Daniel Pomrenke challenges the Minnesota Department of Commerce's (Department) order concluding that relator had submitted residential mortgage applications with false and misleading statements and altered title work, in violation of Minn. Stat. § 58.12, subd. 1(b)(2)(i), (iv), (v) (2000) and Minn. Stat. § 58.13, subd. 1(9) (2000), and barring him from engaging in mortgage origination or servicing in the state. On appeal, relator argues: (1) the Department did not have jurisdiction to initiate disciplinary proceedings against him; (2) the Department's order barring him from engaging in mortgage origination or servicing unconstitutionally infringes on his right to earn a living; (3) the Department's actions during discovery prejudiced relator; and (4) the Department's decision is not supported by the evidence.
At all relevant times, relator Daniel Pomrenke worked as a loan officer for Real Estate Funding, Inc. Real Estate Funding is currently licensed with the Department as a mortgage originator. In January 2001, relator submitted two loan applications to Paragon Bank: one loan application for relator and his wife Connie for approximately $63,000 (Pomrenke loan) and a second application for William and Cherilyn Fecho for approximately $57,000 (Fecho loan). Contrary to Paragon Bank's policy, the submitted loan applications were not signed or dated.
The Pomrenke loan application contained many false statements: (1) the application listed Real Estate Funding owner and president Steven Watts as a "face-to-face" interviewer, but Watts told Department senior investigator Cheryl Costello that he was in Florida at the time the application was submitted, and relator had completed the application; (2) the application stated that Pomrenke and his wife did not have any dependents; in fact, they have one child; (3) the application stated that relator had been working the past four years at Homestar USA as a manager for Remax; relator provided a check stub from Homestar as verification of his employment; but relator was not and has never been employed at Homestar and is not licensed as a real estate agent; and (4) the application stated that relator's wife had been working at Sterling Optical as an optometrist for several years; but relator's wife is not an optometrist and is currently a stay-at-home mother.
The Fecho loan also contained several false statements. The application stated that Fecho had been working the past several years at PFG, Inc. as a chief estimator for construction. But Fecho worked with relator at Real Estate Funding as a receptionist. In addition, the phone number given for PFG, Inc. was the same number given for Homestar USA on the Pomrenke loan application. The administrative law judge (ALJ) and the Department determined that no entity by the name of PFG, Inc. exists in Minnesota.
The Pomrenke and Fecho loans were also submitted to Paragon Bank with altered title work. At the time the loan applications were submitted, the Pomrenke and Fecho properties were each encumbered with two mortgages. But when the title work was submitted to Paragon Bank, the second mortgages were either omitted or listed as paid, giving Paragon Bank the impression that it was in a second, instead of a third, lien position. Paragon Bank vice president Michael Hart testified that he spoke to relator about the situation, and relator indicated that he had directed a Colonial Title employee to delete the second mortgages off of the title work. Relator told Hart that he should not have directed the employee to delete the mortgages, and that he would rectify the situation. When Paragon Bank discovered the altered documents, it demanded the Pomrenkes and Fechos to immediately pay the loans in full.
In April 2001, Hart filed a "suspicious activity" complaint against relator with the Department and other agencies. Costello investigated the complaint and interviewed relator, Watts, and a Colonial Title employee. The parties failed to resolve the matter informally, and on April 8, 2002, the Department served on relator a notice of and order for hearing, notice of prehearing conference, and statement of charges alleging: (1) relator had demonstrated he was untrustworthy, financially irresponsible, or otherwise incompetent or unqualified to act as a mortgage loan originator, in violation of Minn. Stat. § 45.027, subd. 7(4) (2000) and Minn. Stat. § 58.12, subd. 1(b)(2)(v) (2000); (2) respondent had engaged in fraudulent, deceptive or dishonest acts, in violation of Minn. Stat. § 58.12, subd. 1(b)(2)(iv); and (3) respondent had made false, deceptive or misleading statements or representations in connection with a residential loan application, in violation Minn. Stat. § 58.13, subd. 1(9) (2000). Pursuant to Minn. Stat. § 45.027, subds. 6, 7 (2000), the Department ordered relator to appear at a scheduled hearing before an ALJ.
In a letter dated July 17, 2002, the ALJ instructed the parties that: (1) they were required to exchange written exhibits and final witness lists at least one week before the hearing; (2) the Department was required to provide its file to relator within two days; (3) motions to dismiss needed to be filed by a certain time; and (4) the discovery deadline was September 10, 2002. Relator subsequently moved to dismiss, but the ALJ denied his motion, concluding that the Department had jurisdiction over relator, and discovery proceeded.
On August 20, 2002, the Department sent a request for admissions to relator, erroneously directing Joseph Csedo, instead of relator, to make admissions. Relator subsequently informed the Department that he would not be responding to the request for admissions because it was directed at Csedo, and in the event the Department correctly addressed the request to him, he would invoke his Fifth Amendment rights. On August 22, 2002, relator sent the Department discovery requests, and on September 17, the Department sent relator a list of the exhibits and witnesses it intended to present at the hearing. The exhibits included the Pomrenke loan application, the Fecho loan application, an affidavit from the Minnesota Board of Optometry, and the Department's request for admissions. The witnesses included Hart and Costello. Relator moved ...