Crist sets deadline for mortgage broker cleanup

Florida’s Cabinet announced an investigation into the state agency that licenses mortgage brokers — but stopped short of firing its leader.

The Miami Herald--July 30, 2008

TALLAHASSEE —
Declaring his confidence in Florida’s mortgage-broker system ”shaken,” Gov. Charlie Crist gave the state’s top loan regulator two weeks to come up with a plan to toughen licensing standards for mortgage brokers.

The governor also asked his own inspector general to investigate the Office of Financial Regulation — the agency that licenses mortgage brokers — which has been under fire since a Miami Herald series revealed thousands of former criminals were able to peddle home loans in Florida.

The three other members of the Florida Cabinet voted in favor of the measures at their meeting Tuesday.

”It’s clear to me that we need to take action,” Crist said. “People count on us and expect us to do something.”

Still undecided is the fate of the top regulator, OFR Commissioner Don Saxon. Chief Financial Officer Alex Sink — the Cabinet’s lone Democrat — and two statewide consumer groups have called on Saxon to resign.

Crist and the other Cabinet members, Attorney General Bill McCollum and Agriculture Department Commissioner Charles Bronson, have said they’ll withhold judgment on Saxon until the probe is complete.

Saxon defended his agency at the meeting, saying The Miami Herald exaggerated problems at his office. ”Unlike what’s been reported in the media, we do not have a systemic problem of licensing felons,” Saxon said.

`MANY … PROBLEMS’

Sink countered his remarks, saying she’s aware of breakdowns at the agency that go beyond what Saxon has acknowledged. “I happen to believe, and have been told, that there are many systemic problems with the licensing operations, and the enforcement operations, at the OFR.”

The Miami Herald’s investigation showed the agency allowed more than 10,000 people with criminal backgrounds to sell home loans in Florida, including bank robbers, racketeers and cocaine traffickers.

More than 4,000 of those passed OFR background checks despite criminal records, with most committing crimes that state law specifically required the agency to screen — fraud, dishonest dealing and crimes of ”moral turpitude.” Convicted criminals went on to steal at least $85 million from consumers and lenders, the newspaper found.

Florida now has the highest mortgage-fraud rate in the nation.

`SECOND CHANCE’

The governor said during the meeting he wants the state to ”be cautious and exercise a degree of compassion” for license applicants whose prior crimes have no bearing on their ability to act as trustworthy stewards.

”When it doesn’t relate to something of a pecuniary, or financial arena, we need to give people a second chance,” Crist said.

McCollum said he doesn’t think barring people with prior financial crimes goes far enough, calling for a five- to seven-year ban on all felons obtaining licenses as mortgage brokers, Realtors, bankers or others who handle personal financial data.

He noted that Scott Almeida, a mortgage broker highlighted in The Miami Herald series who fleeced 30 victims out of nearly $3 million, had been convicted of cocaine trafficking.

”To take a cocaine trafficker and give him a license to be a mortgage broker, I don’t think it’s any safer than somebody who is convicted of mortgage fraud,” McCollum said.

McCollum’s office successfully prosecuted Almeida, but only after police took over a botched investigation by Saxon’s agency, The Miami Herald found. The agency failed to act on two separate complaints that Almeida and his boss were lying on loan applications and stealing money from their clients.

`TOO LATE’

Meanwhile, Saxon told The Miami Herald that starting Tuesday, he’s following a new policy to stop granting broker’s licenses to anyone convicted of a felony in the past seven years and to deny any applicant found guilty of fraud, dishonest dealing, breach of trust or money laundering.

Saxon said those standards are similar to measures in a sweeping federal housing bill that has been passed by Congress and is expected to be signed into law by the president.

Sink, the Cabinet member whose office has the most interaction with the OFR, said she thinks Saxon’s proposal is ”too little, too late,” and renewed her call for his resignation. ”We could have been doing a lot more before we got to this point today,” she said.

Speaking from the dais to a packed hearing room, Sink said there are legal provisions that could have allowed Saxon’s agency to issue sanctions against those who committed mortgage fraud and that the agency ”could have been denying more” licenses to questionable applicants.

Saxon denied there were breakdowns at his agency and said he would step down if he believed there were. ”I’m very glad the Cabinet decided to go forward with an independent review of our operations,” he said after the meeting. “I feel strongly that once they do, they’ll find our office acted appropriately.”

Although top officials in Saxon’s agency have repeatedly refused to press for the licensing of loan originators — people who do the same job as mortgage brokers — Saxon is now saying his office wants to license them.

The Miami Herald found more than 5,000 loan originators with criminal records operating in Florida.

While the Cabinet investigates Saxon’s agency, other state leaders are calling for their own probes.

SOUTH FLORIDA

State Sen. Gwen Margolis, D-Bay Harbor Islands, is asking for the Miami-Dade Mortgage Fraud Task Force to conduct an investigation into why so many local people with criminal histories were able to obtain mortgage-broker licenses. ”It is our responsibility to make sure that these criminals cannot harm the community anymore,” she wrote in a letter to Miami-Dade Mayor Carlos Alvarez, who started the task force.

State Rep. Carlos Lopez-Cantera, R-Miami, said he wants a House select committee to look into the agency’s licensing practices, including questions over why Saxon’s agency failed to do federal criminal-background checks until 2008, despite a law requiring the checks two years earlier.