DFI Exceeds the Scope of Its Investigatory Authority.
DFI Exceeds the Scope of Its Investigatory Authority.
Once it has notice of potential violations, DFI has broad discretion to determine the scope of the investigation. The legislature declared that the residential mortgage broker business “substantially affects the public interest.” RCW § 19.146.005. The legislature’s state purpose in regulating mortgage broker’s is “to promote honesty and fair dealing with citizens and to preserve public confidence in the lending and real estate community.” Id.The legislature granted DFI’s director “the power and broad administrative discretion to administer and interpret” the Act to fulfill that purpose. RCW § 19.146.223; See Nationscapital, 133 Wn. App. at 88. DFI may broadly examine a business to the extent the director deems relevant to the inquiry. See RCW § 19.146.235.However, there are limitations. The investigation be “commensurate” with the “extent and gravity” of the suspected violations. Nationscapital, 133 Wn. App. at 89. Further, DFI must operate within its regulatory authority. Acts by state agencies that without any authority to act on the subject are ultra vires. Kramarevcky v. Dep’t of Social and Health Services, 122 Wn.2d 738, 748, 863 P.2d 535 (1993). However, DFI asserted no authority over short sale negotiations prior to July 1, 2010 at the earliest.In a recent case DFI requested discovery for periods of time before it exerted authority over short sale negotiations. There is no plausible claim by DFI that it had authority over short sale negotiations prior to July, 2010 at the earliest. Accordingly, DFI has no authority to conduct an investigation of an earlier period.Seth Rosenberg is managing member of The Rosenberg Law Group, PLLC. Mr. Rosenberg and his team has defended numerous licensed individuals against charges from regulatory agencies, ranging from mortgage brokers, loan originators, tow truck drivers, massage therapists, to nurses and CNA’s. If you face charges from a state regulatory agency and need assistance managing the administrative hearing process, you can contact the Rosenberg Law Group seven days a week at info@rosenberglawgroup.net or (206) 407-3300.