Superintendent Felecia Rotellini, Arizona Department of Financial Institutions, announced that the mortgage banker license of Freedom Financial & Mortgage Services Corporation is revoked. In addition to revocation, the company paid a $25,000 penalty for violation of Arizona statutes. The Superior Court dismissed Freedom Financial’s appeal of the Superintendent’s Final Decision & Order, dated October 15th, 2007, cutting off any remaining right to dispute the revocation. The Superintendent’s decision was issued after a multi-day hearing before an administrative law judge.
The Superintendent said “This is a great result & sends a clear message that a mortgage company is not excused from submitting misleading loan applications because the borrower cooperates in the deception. In Arizona it is against the law for a mortgage banker or broker to misrepresent or conceal facts from a borrower or a lender. The law puts a burden on the licensee to tell the truth. They are not excused if the borrower is complicit in making false submissions in the loan application. Further, a lender’s failure to catch inconsistencies or to assess the borrower’s ability to repay, does not excuse the mortgage company’s misrepresentations in the loan process.”
The case against Freedom Financial began with an examination of its business & complaints alleging fraudulent mortgage loans. The Department issued a Cease & Desist Order on March 7th, 2007 ordering the company to discontinue violating Arizona laws regulating mortgage bankers. Following the company’s request for a hearing the Department filed a notice of hearing to revoke the license on April 13th, 2007.
At the administrative hearing, Freedom Financial admitted it had, among other things, used inaccurate advertising, failed to conduct proper investigations before hiring loan officers, employed people whose business conduct it could not control, & allowed borrowers to sign documents containing blank spaces. Many of the admitted violations were originally cited in a previous examination of the lender & remained uncorrected in later examinations.
The evidence at the hearing on the revocation proved that Freedom Financial submitted misleading or inaccurate information on loan applications to lenders about their clients’ income, omitting important facts about the clients’ financial liabilities that diminished their ability to actually repay the loans. Lenders reviewing the loans in question failed to note inconsistencies & irregularities in loan applications they accepted & ultimately funded.
In its defense, Freedom Financial claimed its practices complied with industry standards &, therefore, did not amount to misrepresentations prohibited under Arizona law. The Administrative Law Judge disagreed concluding that the company had a cavalier attitude toward regulation & a poor licensing history. The judge found that the Department satisfied its burden to prove Freedom Financial violated the law prohibiting deceptive practices & to prove grounds for revocation.
The revocation was sustained by an objective, neutral Administrative Law Judge after a full & open hearing on the merits of the case. Superintendent Rotellini praised the work of the Assistant Attorney General on the case & the judge who issued a recommended decision with 164 paragraphs of findings. “The Administrative Law Judge’s Findings of Fact & Conclusions of Law are thorough, thoughtful, & detailed. Her decision was so complete that there were no sustainable grounds for appeal.”