                IN THE SUPREME COURT, STATE OF WYOMING

                                    2014 WY 56

                                                     APRIL TERM, A.D. 2014


                                                             May 5, 2014


IN THE MATTER OF A VIOLATION OF THE
WYOMING RESIDENTIAL MORTGAGE
PRACTICES ACT BY CALCON MUTUAL
MORTGAGE CORPORATION:

CALCON MUTUAL MORTGAGE CORP.,

Appellant
(Petitioner),
                                                     No. S-13-0130
v.

STATE OF WYOMING, ex rel., WYOMING
DEPARTMENT OF AUDIT, DIVISION OF
BANKING,

Appellee
(Respondent).

                   Appeal from the District Court of Laramie County
                    The Honorable Thomas T.C. Campbell, Judge

Representing Appellant:
       James R. Salisbury and Anthony M. Reyes, Riske & Salisbury, Cheyenne,
       Wyoming. Argument by Mr. Salisbury.

Representing Appellee:
      Peter K. Michael, Attorney General; Martin L. Hardsocg, Deputy Attorney
      General; Ryan T. Schelhaas, Senior Assistant Attorney General. Argument by
      Mr. Schelhaas.

Before KITE, C.J., and HILL, BURKE, DAVIS, and FOX, JJ.
NOTICE: This opinion is subject to formal revision before publication in Pacific Reporter Third. Readers
are requested to notify the Clerk of the Supreme Court, Supreme Court Building, Cheyenne, Wyoming
82002, of any typographical or other formal errors so that correction may be made before final publication in
the permanent volume.
BURKE, Justice.

[¶1] The Wyoming Department of Audit, Division of Banking (Division) conducted a
compliance examination of Appellant, CalCon Mutual Mortgage Corporation (CalCon),
and determined that, in six separate brokering transactions, CalCon had received
application fees and “yield spread premiums” exceeding those previously disclosed to its
customers in violation of the Wyoming Residential Mortgage Practices Act. The
Division sought reimbursement of the fees charged in those transactions. CalCon
objected and the matter was referred to the Office of Administrative Hearings (OAH) for
a contested case hearing. The OAH determined that CalCon had violated the Act and the
State Banking Commissioner subsequently ordered CalCon to reimburse the fees.
CalCon filed a petition for review in the district court, and the district court affirmed.
CalCon appeals from the district court’s decision. We affirm.

                                              ISSUES

[¶2]   CalCon presents the following issues:

               1. Whether the Office of Administrative Hearings erred as a
                  matter of law in its construction and interpretation of
                  Wyoming Statute § 40-23-114(d).

               2. Whether the decision of the Office of Administrative
                  Hearings is arbitrary, capricious, and not supported by
                  substantial evidence.

The Division states the issues in a substantially similar manner.

                                              FACTS

[¶3] The facts of this case are undisputed. In March, 2010, the Division conducted a
regular examination of CalCon’s brokering activities within the state to determine
compliance with the Wyoming Residential Mortgage Practices Act. After completing the
examination, the Division concluded that CalCon, in six separate brokering transactions
between January, 2008 and February, 2010, had received application fees and “yield
spread premiums” 1 exceeding those which had been previously disclosed to its


1
  A yield spread premium is a lump sum paid by a lender to a broker at closing when the loan originated
by the broker bears an above-par interest rate. Schuetz v. Banc One Mortg. Corp., 292 F.3d 1004, 1007
(9th Cir. 2002). The federal Department of Housing and Urban Development has explained yield spread
premiums as follows:




                                                  1
customers. In a representative example of the brokering transactions at issue, A.H., a
borrower, submitted a residential loan application to CalCon on July 15, 2009. On the
same day, CalCon provided A.H. with a good faith estimate of the transaction fees which
did not disclose either an application fee or a yield spread premium. CalCon then sent a
revised good faith estimate, which disclosed a $150.00 application fee and a yield spread
premium of $4,224.21, to A.H. on November 17, 2009, seven days prior to execution of
the mortgage loan closing documents. The revised estimate, however, was not
accompanied by a written explanation of the increased fees or the reason for charging
fees exceeding those which were previously disclosed to A.H. In the remaining
brokering transactions at issue, CalCon followed a similar pattern of disclosure of the
yield spread premiums, which ranged in amounts from $131.04 to $11,100.00.
Additionally, in one of the remaining transactions, CalCon did not provide a written
explanation for charging an application fee that was not previously disclosed, as in the
case of A.H.’s mortgage loan application.

[¶4] The Division determined that, in the six transactions at issue, CalCon had failed to
comply with Wyo. Stat. Ann. §§ 40-23-114(d) and 40-23-117(a)(iv) because it did not
provide a clear written explanation for the increase in the fees and the reason for charging
fees exceeding those which were previously disclosed. Relying on Wyo. Stat. Ann. § 40-
23-103(a)(vii), which provides that the State Banking Commissioner shall “[r]equire the
mortgage broker to reimburse the borrower for undisclosed or incorrectly disclosed fees,”



                         Payments to brokers by lenders, characterized as yield spread
                premiums, are based on the interest rate and points of the loan entered
                into as compared to the par rate offered by the lender to the mortgage
                broker for that particular loan (e.g., a loan of 8% and no points where the
                par rate is 7.50% will command a greater premium for the broker than a
                loan with a par rate of 7.75% and no points). In determining the price of
                a loan, mortgage brokers rely on rate quotes issued by lenders,
                sometimes several times a day. When a lender agrees to purchase a loan
                from a broker, the broker receives the then applicable pricing for the loan
                based on the difference between the rate reflected in the rate quote and
                the rate of the loan entered into by the borrower. . . .

                         Lender payments to mortgage brokers may reduce the up-front
                costs to consumers. This allows consumers to obtain loans without
                paying direct fees themselves. Where a broker is not compensated by the
                consumer through a direct fee, or is partially compensated through a
                direct fee, the interest rate of the loan is increased to compensate the
                broker or the fee is added to principal. In any of the compensation
                methods described, all costs are ultimately paid by the consumer,
                whether through direct fees or through the interest rate.

1999 Statement of Policy, 64 Fed. Reg. at 10081 (footnotes omitted).




                                                    2
the Division requested that CalCon refund the application fees and yield spread premiums
to the borrowers. On July 28, 2010, after CalCon failed to comply with the Division’s
request, the Division sent CalCon a “Notice of Intent to Request the Commissioner to
Issue Order Compelling Compliance with Report of Compliance Examination.” CalCon
objected to the Notice of Intent and requested a contested case hearing before the Office
of Administrative Hearings.

[¶5] At the contested case hearing, the presiding hearing examiner received testimony
from the compliance examiner who conducted the review of CalCon’s brokering
activities, the assistant banking commissioner, and CalCon’s owner. Based on this
testimony, the hearing examiner concluded that CalCon should be required to reimburse
the application fees and yield spread premiums to the respective borrowers. The
Commissioner adopted the hearing examiner’s findings of fact and conclusions of law,
and issued a final order directing CalCon to reimburse the fees at issue. The
Commissioner concluded as follows:

             37. . . . I am persuaded by the Division’s argument that the
             intent of [Wyo. Stat. Ann. § 40-23-114] requires a broker to
             provide the consumer a clear written explanation of the
             increased fees at issue in this case and the reasons for the
             increase. When a broker receives fees that increased from the
             first or most recent good faith estimate, the broker must
             provide a revised good faith estimate to the borrower at least
             three business days prior to closing, as well as a clear written
             explanation of the increase in fee and the reason for charging
             a fee that exceeded that which was previously disclosed.
             Simply providing a revised good faith estimate which
             identifies the increased fee, without any explanation as
             CalCon did in this case, does not comply with the statute.

             38. Conversely, CalCon’s interpretation of [Wyo. Stat. Ann.
             § 40-23-114] defeats the purpose of the statute. CalCon’s
             position would allow brokers to increase and receive fees in
             excess of the fees initially disclosed to its customers without
             ever having to provide a clear written explanation of the
             increase in fees and the reason for the increase, as long as a
             revised good faith estimate matched the fees on the HUD
             settlement statement. If the borrower wanted to know if any
             fees increased during the loan process, the borrower would
             have to compare each good faith estimate, line by line. Such
             an interpretation would thwart the legislative purpose of the
             statute to construe it in such a manner as to allow a broker to
             increase fees without ever having to fully inform the borrower


                                            3
              of the increase.

CalCon filed a petition for review in the district court, and the district court affirmed after
concluding that CalCon’s interpretation of Wyo. Stat. Ann. § 40-23-114 “would render
the subsections in (d)(i) and (ii) meaningless.” CalCon timely appealed the district
court’s decision.

                                 STANDARD OF REVIEW

[¶6] When we consider an appeal from a district court’s review of an administrative
agency’s decision, we review the case as though it had come directly from the
administrative agency. State ex rel. Dep’t of Family Servs. v. Kisling, 2013 WY 91, ¶ 8,
305 P.3d 1157, 1159 (Wyo. 2013). The extent of our review is governed by Rule 12.09
of the Wyoming Rules of Appellate Procedure. That rule provides that “Review . . . shall
be confined to the record as supplemented pursuant to Rule 12.08 and to the issues set
forth in the petition and raised before the agency. Review shall be limited to a
determination of the matters specified in Wyo. Stat. 16-3-114(c).” Wyo. Stat. Ann. 16-3-
114(c) (LexisNexis 2011), part of the Wyoming Administrative Procedure Act, provides
that the reviewing court shall:

              (ii) Hold unlawful and set aside agency action, findings and
              conclusions found to be:

                     (A) Arbitrary, capricious, an abuse of discretion or
                     otherwise not in accordance with law;

                     (B) Contrary to constitutional right, power, privilege or
                     immunity;

                     (C) In excess of statutory jurisdiction, authority or
                     limitations or lacking statutory right;

                     (D) Without observance of procedure required by law;
                     or

                     (E) Unsupported by substantial evidence in a case
                     reviewed on the record of an agency hearing provided
                     by statute.

We review an agency’s conclusions of law de novo, and “[w]e will affirm an agency’s
legal conclusion only if it is in accordance with the law.” Dale v. S & S Builders, LLC,
2008 WY 84, ¶ 26, 188 P.3d 554, 562 (Wyo. 2008) (quoting Diamond B Servs., Inc. v.
Rohde, 2005 WY 130, ¶ 12, 120 P.3d 1031, 1038 (Wyo. 2005)).


                                              4
                                     DISCUSSION

[¶7] The parties agree that the dispositive issue in this case is whether the
Commissioner properly interpreted Wyo. Stat. Ann. § 40-23-114 in determining that
CalCon was required to provide a written explanation of increased application fees and
yield spread premiums in the transactions at issue. The statute provides, in relevant part,
as follows:

             § 40-23-114. Disclosure of mortgage broker fees.

             (a) Within three (3) business days of a borrower signing a
             completed mortgage loan application and before the borrower
             provides any consideration to the licensee, the licensee shall
             execute and deliver to the borrower a mortgage brokerage
             agreement. The mortgage brokerage agreement shall be in
             writing, signed and dated by both the borrower and the
             authorized representative of the licensed mortgage broker
             whose services to the borrower constitute mortgage brokering
             and shall contain the following information:

                    ...

                    (iii) A good faith estimate of the fees to be collected,
                    including a credit report fee, property appraisal fee or
                    any other third party fee;

             ...

             (d) A mortgage broker shall not receive any fee that inures to
             the benefit of the mortgage broker, either directly or
             indirectly if it exceeds the fee disclosed on the most recent
             good faith estimate unless:

                    (i) The need to charge the higher fee was not
                    reasonably foreseeable at the time the good faith
                    estimate was written; and

                    (ii) The mortgage broker has provided to the borrower,
                    no less than three (3) business days prior to the signing
                    of the mortgage loan closing documents, a new good
                    faith estimate of settlement costs, a clear written
                    explanation of the increase in the fee and the reason


                                            5
                     for charging a fee that exceeds that which was
                     previously disclosed.

[¶8] CalCon contends that, under Wyo. Stat. Ann. § 40-23-114(d)(ii), a broker is not
required to provide a clear written explanation of an increase in fees as long as the new or
increased fee is listed on a revised good faith estimate provided to the borrower at least
three days prior to closing. This assertion is based on CalCon’s interpretation of the
phrase “most recent good faith estimate.” CalCon claims that “As used in Wyoming
Statute § 40-23-114, the phrase ‘most recent good faith estimate’ can only refer to the
good faith estimate provided to the separate borrowers most recent in time to the date of
closing.” (Emphasis in original.) According to CalCon, “Since the date of closing is the
date on which CalCon received the fees at issue from the lender, and since the yield
spread premiums and/or application fees received by CalCon were disclosed on the good
faith estimate, CalCon was not required to provide the information contemplated by
Wyoming Statute § 40-23-114(d)(ii).” CalCon asserts that its interpretation is consistent
with the mortgage lending process because “A good faith estimate provided at the time of
loan application can only provide that information which is known at the time by the
mortgage broker. Once loan terms have been locked, those terms are provided in a good
faith estimate to the borrower.” CalCon’s argument suggests that a good faith estimate
can be provided only when the lender “knows” what the lending fees will be. We cannot
agree. CalCon misapprehends the nature of an “estimate,” as well as the very purpose
that Wyo. Stat. Ann. § 40-23-114(d)(ii) is intended to serve.

[¶9] In interpreting the phrase “most recent good faith estimate,” as used in Wyo. Stat.
Ann. § 40-23-114, we strive to give effect to the intent of the legislature. We look first to
the plain meaning of the language chosen by the legislature and employ well-accepted
rules of statutory construction if that language is ambiguous or capable of varying
interpretations. Chevron U.S.A., Inc. v. Dep’t of Revenue, 2007 WY 43, ¶ 10, 154 P.3d
331, 334 (Wyo. 2007).

              A statute is clear and unambiguous if its wording is such that
              reasonable persons are able to agree on its meaning with
              consistency and predictability. Conversely, a statute is
              ambiguous if it is found to be vague or uncertain and subject
              to varying interpretations. If we determine that a statute is
              clear and unambiguous, we give effect to the plain language
              of the statute.

                     We have recognized that divergent opinions among
              parties as to the meaning of a statute may be evidence of
              ambiguity but is not conclusive. . . . Ultimately, whether a
              statute is ambiguous is a matter of law to be determined by
              the court.


                                             6
Id., ¶ 13, 154 P.3d at 335 (quoting RME Petroleum Co. v. Wyo. Dep’t of Revenue, 2007
WY 16, ¶¶ 25, 28, 150 P.3d 673, 683-84 (Wyo. 2007)) (internal citations omitted). “[I]t
is a fundamental rule of statutory interpretation that all portions of an act must be read in
pari materia, and every word, clause, and sentence must be construed so that no part is
inoperative or superfluous.” State ex rel. Wyo. Workers’ Safety & Comp. Div. v. Singer,
2011 WY 57, ¶ 12, 248 P.3d 1155, 1159 (Wyo. 2011) (quoting Deloges v. State ex rel.
Wyo. Workers’ Compensation Division, 750 P.2d 1329, 1331 (Wyo. 1988)).

[¶10] We conclude that the statute is unambiguous. Under Section 114(d), a broker may
only receive a fee that exceeds the fee disclosed on the “most recent good faith estimate”
if a “new good faith estimate,” accompanied by a written explanation of the increase in
the fee and the reason for charging a fee that “exceeds that which was previously
disclosed,” is provided to the borrower at least three days prior to closing. The statute’s
references to a “new good faith estimate” and to a fee exceeding that which was
“previously disclosed,” indicate that the “most recent good faith estimate” refers to the
estimate that has previously been provided to the borrower, as required by Wyo. Stat.
Ann. § 40-23-114(a)(iii). If the broker seeks to charge a higher fee, then the broker must
provide a new good faith estimate, which then replaces the original good faith estimate as
the “most recent good faith estimate.” In this manner, the statute operates to prevent a
broker from charging a fee that has increased from the previous estimate without
providing a written explanation and the reason for charging a fee that exceeds that which
was previously disclosed. This operation is consistent with the purpose of the statute, as
explained by the assistant banking commissioner at the contested case hearing:

              [T]hat statute is set up, it’s designed, again, as a consumer
              protection statute, to try, to the best of its ability, to prevent
              the, quote unquote, bait and switch tactics [by requiring a]
              good faith estimate disclosure to consumers to tell them
              exactly what they’re going to have to pay in the transaction
              that they are agreeing to move forward with.

                      The law then says that you can’t charge anything
              different[] than what you’ve told consumers unless you re-
              disclose to them with a new good faith estimate, and
              specifically provide them with a written explanation of what
              is changing on that recent good faith estimate and the reason
              that it’s changing.

Further, we note that any reference to the time of closing as the operative date for
determining the “most recent good faith estimate” is conspicuously absent from the
statute. If the legislature had intended for the “most recent good faith estimate” to be
measured relative to the closing date, it could have easily so provided. However, we are


                                              7
unable to find such intent in the plain language or the purpose of the statute. For these
reasons, we conclude that the “most recent good faith estimate,” as used in Wyo. Stat.
Ann. § 40-23-114, refers to the estimate that has previously been provided to the
borrower. Because CalCon received fees in excess of the fees originally disclosed to the
borrowers in the transactions at issue, and because it did not provide a clear written
explanation of the increased fees or the reason for charging fees exceeding those which
were previously disclosed, the Banking Commissioner properly concluded that CalCon
was statutorily precluded from accepting the increased fees.

[¶11] In its second issue, CalCon contends the Commissioner’s decision was per se
“arbitrary and capricious” because the Division has not used its regulatory powers to
define the phrase “most recent good faith estimate.” We find no merit in this argument.
We have already determined that the plain language of the statute is sufficient to convey
the meaning of the phrase “most recent good faith estimate.” As we have previously
stated, “A clear statutory direction is enforceable by an agency in accordance with
its plain meaning without promulgation of a rule.” Thomson v. Wyoming In-Stream Flow
Comm., 651 P.2d 778, 791 (Wyo. 1982). Accordingly, we conclude that the
Commissioner’s decision was not arbitrary or capricious.

[¶12] Affirmed.




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