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Mortgage Broker Fun Facts

Felons Can’t Vote in Florida but are Free to Fleece the Public
From the Miami Herald:

The Miami Herald’s investigative team reported on Sunday that the state has approved over 10,000 mortgage broker licenses for convicted felons since 2000; over 4,000 were issued to individuals who had been convicted of crimes such as fraud, extortion, racketeering, and bank robbery – crimes that are specifically prohibited by the licensing statute – and a smattering of licenses are held by felons convicted of violent crimes including 15 murders. Collectively these felons were guilty of 2,821 financial crimes, including 922 larcenies, 752 frauds, 327 burglaries, 161 forgeries and 67 robberies. The list includes brokers arrested and convicted in Florida, those who had been imprisoned in other states, and those convicted in federal courts.

The rush for mortgage broker licenses was fueled, at least in part, by the superheated Florida real estate market. As home prices reached the highest levels in history and the rate of new construction, particularly of condominiums, soared, the possibility of easy money lured record numbers of people into the mortgage business. Regulators were hard pressed to keep up with the flood of applications; between 2002 and 2007 the number of mortgage broker licenses tripled. More than half the people who wrote mortgages in Florida during that period did not have any criminal background checks. Despite repeated pleas from industry leaders to screen them, Florida regulators have refused. During the boom period only 29 applicants were rejected based on their criminal records.

The investigative team uses the example of Scott Almeida who admitted on his license application that he had served time in federal prison for cocaine trafficking. Florida regulators asked for a character reference and the name of a reputable supervisor to oversee his mortgage business. He provided a note from his mother and the name of a guy he had met in the prison visitor room. What then ensued, after Almeida was approved and paid the license fee, was a crime spree that lasted three years, and stretched from Tampa to Miami. Almeida arranged nearly $3 million in fraudulent loans and fleeced 30 people.

The Florida Office of Financial Regulation — which polices the mortgage industry – twice failed to act on information that Almeida was stealing from clients and his scam continued until the police caught up with him and threw him into jail.

State regulators allowed thousands of ex-convicts to enter a profession that gave them access to the most sensitive and personal financial information: credit cards, bank accounts and Social Security numbers. These criminals then went on to commit nearly $85 million in mortgage fraud, stealing customer identities, money, and sometimes their homes. Felons committed fraud which targeted both customers and banks, boosting reported borrower incomes and arranging for complicated sale and resale schemes using straw buyers and inflated appraisals.

The newspaper quoted Don Saxon, commissioner of the Office of Financial Regulation, who said he didn’t know why his staff issued licenses to bank robbers and racketeers, but would look into the cases cited by The Herald.

“You’re asking me to get into the heads of the people who made those choices,” Saxon said. He added: “Certainly we are not proud of the fact that these people have gone on to do bad things.”

OFR officials who do the screening said there is no single standard they use to decide who gets a license: The criminal background check is just one of many factors.

“We look at all the facets around, you know, whatever file, and we predicate on the fact that everybody deserves another chance,” said Terry Straub, director of the OFR’s Division of Finance, which regulates the mortgage industry in Florida.

Florida has been hit harder by the housing crisis than most other states, but the authors of the Herald article, Jack Dolan, Rob Barry, and Matthew Haggman, claim that other states such as Colorado and Alaska do not require a license and have had similar problems with mortgage fraud.

360 mortgage brokerages don’t cut it with state
Many across Indiana face sanctions by not responding to new rules on compliance by Tuesday’s deadline
Taken from the Indianapolis Star –

If the sluggish economy hasn’t already forced them to close, the 360 Indiana mortgage brokerage companies that have failed to meet new state standards will face other sanctions.

Secretary of State Todd Rokita said about 40 percent of the state’s 950 brokerage companies did not heed his warning to comply with state law by his Tuesday deadline.

But he noted that letters mailed to 79 companies informing them of their offenses had been returned as undeliverable, indicating they had gone out of business. Another 89 have voluntarily surrendered their licenses.

Mortgage companies across the country have closed or scaled back in recent months as the housing market has deteriorated.

Changes in Indiana law require mortgage brokerages to employ a principal manager who has passed a competency exam, but they have been slow to comply since the requirements took effect in July 2007. Last month, Rokita announced he would suspend the licenses of companies that didn’t comply by Tuesday.

The law also requires loan officers to pass background checks and pay registration fees with the state.

Since Rokita issued his warning, more than 130 people have passed the competency exam. Rokita said the reforms should help legitimize an industry marred by the subprime mortgage crisis

“This was an industry that was kind of operating the way I would envision a mortgage broker operating in the Wild West,” Rokita said. “There are very good people in the industry, but there are a lot of bad apples, too.”

Rokita said his office will begin to investigate any companies that may continue to do business without the proper credentials. Evidence of wrongdoing will be passed on to local prosecutors.

Matthew Symons, spokesman for the Marion County prosecutor’s office, said a violator could face a felony charge punishable by up to three years in prison and a $10,000 fine.

“If the secretary of state’s office has any reason to believe someone is doing that, we’ll be happy to take a look at it and file charges,” Symons said.

The process could take “a very long time,” Rokita said. “We recognized this would be a monumental effort, and we’re prepared for it.”

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