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Demand Is Intensifying For Mortgage Chief To Resign
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Published: July 23, 2008
TAMPA - A second group called for Florida's top mortgage regulator to step down Tuesday, a day after the state's chief financial officer asked for his resignation.
Their demands followed a newspaper investigation that revealed his office approved licenses for thousands of mortgage brokers with criminal backgrounds. Some went on to commit nearly $85 million in mortgage fraud.
The fraud outlined in the Miami Herald report included stealing customers' money, identities and, in some cases, their homes.
Don Saxon leads the state's Office of Financial Regulation, the agency that oversees mortgage brokers. On Tuesday, ACORN, a community organization that works with victims of fraudulent lending, said it will hold news conferences Thursday calling for Saxon to resign immediately.
"At the end of the day someone has to be held responsible for what happened to so many buyers," said Carolyn Patmon, head of the group's anti-foreclosure committee. "We have people come to our office every day who are losing their homes because they were ripped off by unscrupulous mortgage brokers or mortgage originators."
Saxon released a statement Monday that said his office is investigating the issues raised in the newspaper report and hinted that laws governing the mortgage-broker application process need to be strengthened.
"While my staff conducts an extensive background review of each applicant, the law does not permit the Office to deny an applicant for any past arrest, or even any criminal conviction - only certain types of convictions may be considered," he said in the release.
Some Felons Found A Loophole
The Miami Herald's eight-month investigation found that regulators approved 10,529 people with criminal records to work in the mortgage profession from 2000 to 2007, during Florida's housing boom. Some had been convicted for crimes such as bank robbery, racketeering, mortgage fraud and even murder.
Saxon's office is charged with flagging such convictions, but the Herald story said regulators often ignored a 2006 state law that requires criminal background checks on mortgage brokers. At least 20 brokers were allowed to keep their licenses after they were found to have committed fraud, the newspaper said.
Thousands of convicted felons, some of whom were turned down for licenses, followed a loophole into the business by becoming loan originators, which does not require a license. The originators serve as middlemen and connect borrowers to banks. Industry leaders have asked state regulators to pursue regulating originators, but the newspaper report said Saxon's office never asked the Legislature for that authority.
Saxon started his career in 1979 as an investigative supervisor with the state's Department of Banking and Finance. He was appointed to his current post in January 2003.
State CFO Alex Sink sits on the Financial Services Commission, which oversees Saxon's office. She called for his resignation Monday and asked for an emergency order to prevent felons with financial or violent crimes from receiving or having their mortgage-broker licenses renewed while the state investigates Saxon's office. Tara Klimek, spokeswoman for Sink's office, said, "It's just common sense that you don't give a bank robber your personal information."
Florida Is A Hotbed For Fraud
Mortgage fraud is not a new problem in Florida. During the housing boom, as sales prices shot up as much as 20 percent a year in some cities, fraud was rampant. Now that the housing market is struggling, lenders and homeowners are dealing with the fallout.
Florida is considered by mortgage experts to be a hotbed for mortgage fraud, and the state ranks second in the nation for the number of foreclosure filings.
The FBI has said more suspected mortgage fraud cases were reported by lenders in Florida in 2007 than reported in the entire country in 2006. Tampa ranks seventh on the agency's top 10 list for suspected mortgage fraud. Miami, the other Florida city on the list, ranks fourth.
Some local real estate leaders said Tuesday that they were happy to see Sink's office respond to the allegations and hoped change would result. It's a shame, however, that it took a newspaper report to spark action, said Frank Gregoire, former chairman of the Florida Appraisal Board.
The appraisal board oversees real estate appraisers and can revoke licenses when they are found to be involved in fraud. Gregoire said the board sought for two years to meet with regulators about mortgage brokers. It finally got a meeting late last year.
"They were receptive to what we had to say," Gregoire said. "But they offered an awful lot of excuses for why a large number of mortgage brokers were beyond their jurisdiction."
Reporter Shannon Behnken can be reached at (813) 259-7804.
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