Crist tightens mortgage licenses

By JACK DOLAN and MARY ELLEN KLAS

Miami Herald

Saying his confidence in the state's mortgage broker licensing system is "shaken," Gov. Charlie Crist has given the state's top mortgage regulator two weeks to come up with proposals to tighten licensing standards for those who sell home loans in Florida.

During a meeting Tuesday of the Florida Cabinet, Crist also called for his own inspector general to investigate the Office of Financial Regulation. The other members voted unanimously with the governor.

Still undecided is the fate of Don Saxon, commissioner of the Office of Financial Regulation, which licenses mortgage brokers. Chief Financial Officer Alex Sink called for his resignation last week.

The vote follows a Miami Herald investigation that showed Saxon's agency allowed more than 10,000 people with criminal backgrounds to sell home loans in Florida between 2000 and 2007.

Thousands of those passed OFR criminal background checks, despite committing crimes that state law specifically required the agency to screen - including fraud, dishonest dealing and crimes of "moral turpitude."

Florida now has the highest mortgage fraud rate in the nation. Ex-convicts licensed by the state went on to commit at least $85 million in mortgage fraud, the newspaper found.

Saxon, who spoke at Tuesday's meeting, told the governor and Cabinet members he believes The Herald series exaggerated the flaws of his office when it reported the state granted mortgage brokers licenses to thousands of convicted felons, including bank robbers, racketeers and crack dealers.

"I believe there's been a rush to judgment by the media," Saxon said. "Unlike what's been reported in the media, we do not have a systemic problem of licensing felons."

But Sink countered his remarks, saying there are provisions in the law that could have both allowed him to issue sanctions against those who committed mortgage fraud and that the office "could have been denying more" brokerage licenses to questionable applicants.

"My distress about the situation is that the commissioner is coming before us today telling us about some of the things his department is going to be doing and he's known about these issues certainly for many months . . . and we could have been doing a lot more before we got to this point today," she said. "To me, it's too little too late."

Crist said he didn't want to rush to judgment following the newspaper's investigation, but added: "It's clear to me that we need to take action. People count on us and expect us to do something."

After the meeting, Saxon said that, as of Tuesday, his policy is to stop granting a mortgage broker's license to anyone convicted of a felony in the last seven years and to deny any applicant who has been found guilty of fraud, dishonest dealing, breach of trust or money laundering.

The new policy reflects measures now being set out in a sweeping federal home rescue legislation, Saxon said. The bill has passed Congress and has been sent to the White House for the president's signature.

Saxon said he will propose rule changes to codify the federal legislation in Florida.

The federal bill also requires states to license "loan originators," professionals who do the same job as mortgage brokers but so far have not been licensed or subjected to criminal background checks.

Internal agency documents and e-mail show that top OFR officials repeatedly refused to license loan originators in recent years, even after industry representatives told them that the profession was full of criminals.