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Department of Financial Institutions v. Massey

Court of Appeals of Indiana

September 8, 2014

DEPARTMENT OF FINANCIAL INSTITUTIONS, STATE OF INDIANA, Appellant-Respondent,
v.
MICHAEL MASSEY, Appellee-Petitioner

APPEAL FROM THE MARION SUPERIOR COURT. The Honorable Theodore M. Sosin, Judge. Cause No. 49D02-1108-MI-31784.

ATTORNEYS FOR APPELLANT: GREGORY F. ZOELLER, Attorney General of Indiana; FRANCES BARROW, Deputy Attorney General, Indianapolis, Indiana.

ATTORNEYS FOR AMICUS CURIAE: MARGARET C. LIU, Conference of State Bank Supervisors, Washington, District of Columbia; A. SCOTT CHINN, JON LARAMORE, Faegre Baker Daniels LLP, Indianapolis, Indiana.

KIRSCH, Judge. BAILEY, J., and MAY, J., concur.

OPINION

Page 854

KIRSCH, Judge.

The Indiana Department of Financial Institutions (" the DFI" ) appeals following the trial court's reversal of the DFI's decision to deny Michael Massey a Mortgage Lender Originator's (" MLO" ) license. The DFI now appeals, presenting two issues that we restate as follows:

I. Whether the DFI has made a prima facie showing that it is the MLO licensing authority; and
II. Whether the DFI has made a prima facie showing that it acted within its discretion when it denied Massey an MLO license on character and fitness grounds.[1]

We reverse.

FACTS AND PROCEDURAL HISTORY

Michael Massey is a MLO who sells residential mortgage loans to the public. Prior to the passage of the federal Secure and Fair Enforcement for Mortgage Licensing Act (" SAFE" ) and the Indiana First Lien Mortgage Lending Act (" the FLMLA" ) in 2008, MLOs operating in Indiana were not required to obtain a license. During the summer of 2010, Massey applied for an MLO license. Massey completed the licensing requirements, including providing a summary of his criminal history. Massey had been convicted in 1976 of three counts of armed robbery for which he served four years in prison. In 1996, Massey had been convicted of federal charges of possession of marijuana with intent to deliver and possession of a firearm by a felon. Massey served six years in prison for those convictions.

The National Mortgage Licensing System and Registry (" NMLS" ) processes and renews MLO license applications. On July 14, 2010, the NMLS sent Massey an email indicating that his MLO license had been approved.[2] On July 20, 2010, the DFI sent Massey an email informing him that the DFI was unable to approve his MLO license due to his criminal history. The DFI email alerted Massey that he could pursue his MLO license application by appearing at a regularly-scheduled meeting of the DFI Board. Massey exercised that option, but the DFI Board unanimously denied his application, citing character and fitness grounds and the fact that Massey had been convicted of a crime of dishonesty, armed robbery.

Massey sought administrative review, arguing that the DFI had no authority to deny his application and that, even if the DFI had that authority, his armed robbery conviction was not a crime of dishonesty that precluded him from receiving a license. After a hearing on the matter, the Administrative Law Judge (" ALJ" ) upheld the DFI's denial of Massey's MLO ...


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