Florida told to get tough on home loan industry

Wednesday, September 17, 2008

Florida told to get tough on home loan industry
More than 10,000 people with criminal histories were allowed to sell mortgages during the housing boom

By Josh Hafenbrack
Tallahassee Bureau

September 17, 2008

TALLAHASSEE

State legislators should broaden regulation of Florida’s home loan industry, according to an investigation detailing the state’s failure to police the mortgage industry during the boom years.

While unscrupulous loan brokers were defrauding Florida home buyers for millions, the state Office of Financial Regulation failed to order federal background checks and fingerprint scans for people applying for mortgage licenses as required by state law, Gov. Charlie Crist’s chief inspector general, Melinda Miguel, said in the report released Tuesday.

While regulators were “asleep at the wheel,” as one legislator put it, Florida racked up the highest home-loan fraud rate in the country — twice the national average.

The report urges legislators to put in place regulations on thousands of mortgage peddlers operating outside the bounds of state regulation — so-called loan originators. In more than 200 cases, people became loan originators after they couldn’t get licenses as mortgage brokers.

In addition, the maximum $5,000 penalty for mortgage fraud is too small, the report said, noting that the illicit profit from a single fraudulent home sale often far outweighs the fine. It urged the Legislature to increase those penalties.

“I think we have to take those recommendations and put them into action,” Crist said Tuesday.

The inspector’s report came after recent stories in The Miami Herald showed more than 10,000 people with criminal histories, including convictions for money laundering and cocaine trafficking, were allowed to sell home loans during the real estate boom from 2000 to 2005.

In August, the scandal led to the ouster of the state’s top mortgage regulator, Don Saxon, and emergency rules that ban anyone convicted of financial crimes like money laundering from getting mortgage licenses.

The next target should be the unregulated loan originators, said Sen. Bill Posey, R-Rockledge, who chairs the Banking and Insurance committee. “From what I understand, those are the guys who really pulled the most shenanigans,” he said.

Rep. Carlos Lopez-Cantera, a Miami Republican who chairs the Business Regulation committee, said he wants to bring state officials in to testify, under oath, and to pursue legislation strictly defining the state Office of Financial Regulation’s chain of command.

Josh Hafenbrack can be reached at or 850-224-6214.

Copyright © 2008, South Florida Sun-Sentinel