Editor's note: This story contains corrected material. See end for details.
TALLAHASSEE — Florida's top banking regulator is under fire after a newspaper investigation exposed that thousands of convicted criminals were licensed as mortgage brokers during the state's recent real estate boom.
The Miami Herald reported Sunday that more than 10,000 mortgage professionals with criminal records worked in Florida between 2000 and 2007. And more than 4,000 of that number were licensed brokers who cleared background checks despite committing crimes — like fraud, racketeering and extortion — that state regulators are supposed to flag and not license.
The story, based on an eight-month investigation, linked several of the criminals-turned-brokers to cases of mortgage fraud where either banks or borrowers fell victim.
Now, Florida Chief Financial Officer Alex Sink is calling for Financial Regulation Commissioner Don Saxon to step down. Sink is one of four members of the Florida Cabinet, which oversees the agency that regulates mortgage brokers. She needs Gov. Charlie Crist's approval to oust Saxon.
"She has lost her confidence in the current commissioner, as perhaps may have Floridians across the state after reading these news reports. It's essential you have leadership that restores confidence," said CFO spokeswoman Tara Klimek.
Crist's chief of staff Eric Eikenberg called the findings unacceptable and said he expected the Cabinet to discuss the matter and Saxon's future at its next meeting July 29. Crist was in Europe on Monday and could not be reached.
"It's outrageous. There's no other word for it. It's outrageous," said Eikenberg
The Cabinet's two other members, Attorney General Bill McCollum and Agriculture Commissioner Charles Bronson, also pledged to look into the matter but declined to discuss specific allegations until they knew more, spokesmen for each official said.
Saxon released a statement on Monday saying his office is "conducting an in-depth review of the information contained in the report to address all the issues raised. I am committed to investigate the concerns and fully address all issues identified."
The spokeswoman for the Office of Financial Regulation, Holly Hinson, said that state law only prevents the agency from licensing felons convicted of fraud, dishonest dealing or any act of moral turpitude, implying that Saxon's staff couldn't legally bar some types of felons from obtaining licenses.
Sink's office wants to create emergency regulatory rules that would specifically address or prevent licensing felons.
"The rule could be if you commit murder or mortgage fraud or racketing or rob a bank, you're not entitled to a mortgage broker license, although there's lot of discussion about what kind of direction it should go," said Klimek with the CFO's office.
In a second story Monday, the Herald highlighted that thousands of convicted criminals also worked as unregulated "mortgage originators," or salespeople that basically function as intermediaries between the banks and borrowers. The newspaper said that state regulators, despite requests from industry leaders to regulate originators, never pursued such authority from the Legislature.
The Florida Bankers Association said the Herald's series proves what they insist has been going wrong with the state's foreclosure crisis: loans written by nonbank lenders.
"Here-today-gone-tomorrow mortgage originators were in the practice of doing whatever needed to be done to close the loan. As we now see, some of the mortgage loan originators were willing to lie, cheat or steal just to seal the deal," said Florida Bankers Association president & CEO Alex Sanchez in a statement.
Editor's note: This story contains corrected material. The Miami Herald reported Sunday that more than 10,000 mortgage professionals with criminal records worked in Florida between 2000 and 2007. That number included both loan originators and licensed brokers. A story in Tuesday's Times was incorrect on the kinds of professionals that number included.
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