Gary Kafka, former body builder with a long rap sheet and violent past, wrote millions of dollars in mortgages in South Florida without ever applying for a state license.

Fresh out of prison after serving time for bank fraud, he never went through a criminal background check before selling loans. He never took a competency exam.

He never had to.

More than half the mortgage professionals registered in Florida -- 120,563 -- entered the industry this decade without being licensed by the state, The Miami Herald found.

Known as loan originators, they perform the same job as mortgage brokers but aren't bound by the same rules.

Time and again, industry leaders asked Florida regulators to bring this group under their watch by imposing mandatory licensing. But regulators refused to press for any changes, claiming that lawmakers would never approve.

The state's refusal proved costly during the biggest housing boom in Florida history: Thousands of loan originators entered the industry with criminal histories, state records show.

While The Miami Herald found breakdowns in the state's licensing system for mortgage brokers, the lack of controls over originators created even more problems for an industry steeped in the highest fraud rate in the nation.

The special group was created by state lawmakers 17 years ago to make it easier for lenders to hire people as the industry was growing.

But in the past eight years, more people with criminal records jumped into the business as loan originators than as any other category of mortgage professionals.

'IT'S EMBARRASSING'

''It's more than disappointing, it's embarrassing,'' said Joseph Falk, a Miami mortgage broker and former president of the National Association of Mortgage Brokers, who tried to get regulators to license loan originators in 2002.

''It was pretty easy for someone to enter the industry because there were no standards. If there's no one policing, anyone who wanted to join the industry could do so.''

Pamela Simmons turned to a loan originator with a criminal past in 2005 to refinance her three-bedroom house in Pompano Beach, but ended up losing it.

''This was everything to me,'' said the single mother, tears in her eyes as she stood in front of the house. ''It's the only home I ever owned.''

A review of thousands of pages of court documents, state industry reports, internal e-mails and police reports shows that from 2000 to 2007:

• 5,306 people with criminal histories became loan originators -- a rate of nearly two a day. Worse, those include 2,201 who had committed financial crimes, such as fraud, money laundering and grand theft.

• Even large lenders hired loan originators with criminal backgrounds. The Miami Herald found that in at least 30 companies with 50 or more employees, more than one in five originators had a criminal record.

• Nearly two dozen people stripped of their licenses as mortgage brokers were able to sidestep regulators by becoming loan originators. Nine others who were denied licenses because of prior crimes or regulatory violations were able to do the same.

''It's a huge hole,'' said Ronald Brenner, a former Florida mortgage regulator who once led the agency's Miami office. ''You could get the worst thief in the world, a fraudster to the nth degree, and when he gets out of jail he can come work at your mortgage operation, and if he doesn't have a broker's license, all the better.''

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