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Mandatory license denial not double jeopardy, court rules

New mandatory federal rules that require mortgage brokers to reapply for a license and that deny licenses to applicants who have been convicted of felony fraud do not improperly re-litigate settled issues, even if a licensee has already been disciplined for the underlying conduct, the Fourth District Court of Appeal of Florida ruled September 3 (Emiddio v. Florida Office of Financial Regulation).

In 2002, Jeanne Emiddio, a licensed mortgage broker, pleaded no contest to felony Medicaid fraud. As a result of her conviction, Florida’s Office of Financial Regulation (OFR) moved to revoke her license but eventually allowed her to keep it on a probationary status.

Subsequently, in response to the mortgage crisis in 2008, Congress passed the Secure and Fair Enforcement for Mortgage Licensing Act, which created a new professional title, “loan originator,” to cover both mortgage lenders and brokers. The act forbade licensure of applicants who have been convicted of felony fraud, required all applicants to apply through a national system, and required states to implement its provisions to avoid federal intervention.

To comply with the new law, Florida altered its licensing scheme, barring applicants with felony fraud convictions. The new scheme invalidated existing mortgage broker licenses and required former licensees applicants to re-apply through the new system.

Accordingly, when Emiddio re-applied for licensure in 2010, OFR denied the application based on her prior convictions. Emiddio contested the decision, arguing that OFR’s decision not to revoke her license in 2004 should be the final word on her offending conduct; using the same events to now deny her licensure, she claimed, would impermissibly re-litigate her earlier, now-settled case.

Judge Alan Forst, in the court’s written opinion, disagreed, ruling that the state could deny Emiddio a license. The introduction of the new standards created a new legal situation, to which principles preventing the re-opening of a previous case did not apply.

In addition, Forst continued, while a per se bar against all applicants convicted of fraud felonies might be unconstitutional—even when the state’s governor has restored their civil rights—Emiddio had failed to raise that issue in a lower court, and was barred from doing so on appeal.