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Negligent Florida Let Criminals Infect Mortgage Industry

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The Tampa Tribune

Published: July 22, 2008

It's no surprise Florida leads the nation in mortgage fraud. State regulators have allowed thousands of criminals to enter the mortgage business, scarcely lifting a finger to protect homebuyers from con artists.

A blockbuster investigation by The Miami Herald details the devastation that resulted from the state's regulatory neglect. In an eight-month investigation, the newspaper found:

• From 2000 to 2007, regulators approved 10,529 people with criminal records to work in the mortgage profession.

• Some of these criminals committed nearly $85 million in mortgage fraud, stealing customers' identities, their savings and even their homes.

• Regulators ignored a state law adopted in 2006 requiring criminal background checks on mortgage brokers. The backgrounds of more than half the people who wrote mortgages in Florida were never checked.

• Despite the epidemic of mortgage fraud in recent years, license revocations declined during the last five years.

• And regulators allowed at least 20 brokers to keep their license after committing fraud.

Florida Chief Financial Officer Alex Sink is right to call for the resignation of Don Saxon, who heads the Florida Office of Financial Regulation and oversees the mortgage industry.

Saxon's record is shameful. His office awarded mortgage licenses to bank robbers, racketeers and cocaine traffickers. It approved licenses for applicants caught lying or who admitted to crimes that should have disqualified them. Indeed, regulators had no qualms about empowering criminals to handle people's money during home sales, often the most important financial transaction of their lives.
Lawmakers share the blame. They gave little thought to consumers while cutting protective regulations. They even created a special job category - loan originator - that performs the same functions as a broker but is not licensed or subject to background checks.

Industry leaders, knowing the potential for abuse, campaigned for tougher oversight, but regulators and lawmakers refused to close the loophole.

The Herald found more than 5,000 people with criminal records became loan originators between 2000 and 2007 - including 2,201 who had committed financial crimes such as "fraud, money laundering and grand theft."

Granted, the real estate market was fast and furious during those years, making oversight a challenge. But that is no excuse.

It is during boom times that the public especially needs protection from financial predators.

The aversion to sensible regulation by federal and state leaders in recent years has proved costly.

The results can be seen in predatory lending practices, widespread foreclosures and a mortgage industry infected by scam artists.

New leadership is needed at the Office of Financial Regulation, along with a thorough investigation of how Florida so thoughtlessly threw its mortgage broker industry to the wolves.

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