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A Times Editorial

As mortgage mess spread, Florida failed

There is plenty of blame to spread around for the mortgage crisis and the record number of home foreclosures, from greedy mortgage companies to individuals who recklessly bought more house than they could afford to lax federal regulation. Now it appears the state of Florida shoulders a good bit of responsibility as well. The state has failed to adequately screen mortgage professionals, aggressively discipline those who took advantage of borrowers or even regulate a significant portion of the industry. Gov. Charlie Crist and the Cabinet need to take immediate action to ensure the state fulfills its obligation to protect homeowners from the worst of the predatory brokers.

An eight-month investigation by the Miami Herald ( is appropriately labeled "Borrowers Betrayed.'' The newspaper found thousands of ex-convicts were allowed by state regulators to enter the mortgage business, where they had access to borrowers' personal financial information. From 2000 to 2007, the state let more than 10,000 people with criminal records go to work in the mortgage business — including more than 4,000 who passed background checks even though they committed crimes such as fraud and extortion that state law says should be flagged by regulators. A 2006 law requiring national criminal background checks was routinely ignored by the Office of Financial Regulation.

Guess what happened: The Herald found those ex-convicts committed more than $85-million in mortgage fraud and stole identities and money from some borrowers.

It gets worse. While the state let thousands of criminals into the mortgage business, it was less than aggressive in rooting out the bad apples after they got their licenses. The number of revocations declined over the last five years, the newspaper reported, and at least 20 brokers kept their licenses even after committing mortgage fraud. It seems Florida opened the door wide open for virtually anyone who wanted in on the mortgage business during the housing boom, then let them prey on Floridians with little oversight.

It turns out the state does not even regulate a key section of the industry. Loan originators do not undergo any criminal background checks or exams. And when the mortgage industry itself lobbied for changes as fraud cases escalated, the Office of Financial Regulation resisted. The office's commissioner, Don Saxon, told the Herald he did not push for the changes because they would not pass the Legislature. He apparently is more interested in practicing bad politics than promoting good policy to protect consumers.

Crist and the Cabinet cannot let this abdication of responsibility continue. Chief Financial Officer Alex Sink has called for Saxon to be fired. Saxon was in full damage control Monday and pledged to push reforms, but the governor and Cabinet should hold him accountable for the office's failure to protect the public. Beyond that, they should ensure the office has the resources to do its job and send a clear signal that this appalling record is unacceptable. Floridians expect the state to carry out the law and do its part to protect them from predatory lenders who should not be in the business. The Herald's report provides convincing evidence the state has failed miserably, and voters should demand answers.

As mortgage mess spread, Florida failed 07/21/08 [Last modified: Monday, July 28, 2008 3:30pm]
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