TALLAHASSEE -- In a stinging critique of the state's oversight of the mortgage industry, top Florida investigators found that state regulators failed to alert police agencies to crooked mortgage brokerages, ignored citizen complaints and allowed hundreds of people with criminal histories to peddle loans.

The report released Tuesday to Gov. Charlie Crist and the Cabinet criticized the Office of Financial Regulation, saying the agency broke down in key areas, including screening brokers and shutting down shoddy operations, while the state grappled with the nation's worst home loan fraud crisis.

The investigation, carried out by the Inspectors General of the State Cabinet Offices, concluded the state's regulatory system was ``insufficient to protect the people of the state of Florida.''

The six-week probe was prompted by a Miami Herald series, Borrowers Betrayed, that found sweeping breakdowns in the state enforcement system, including the licensing of thousands of criminals, including money launderers, racketeers and cocaine traffickers.

The Herald's series led to the forced resignation of Commissioner Don Saxon, who had overseen the agency since 2003.

Saxon said last month he hoped the report would vindicate his leadership of the agency. When asked Tuesday if the audit had done so, Crist responded with an abrupt ``No.''

Saxon, 57, who is to step down in two weeks, was on vacation and didn't return repeated calls for comment.

Investigators said the agency functioned without clear guidelines, making up rules as it went along and operating at times on wrong interpretations of the law.

''In some instances, the office was not complying with existing governing directives,'' the report states.

All the while, mortgage fraud skyrocketed during the most explosive housing boom in state history. Today, a quarter of all reported fraudulent loans across the country are for Florida properties.

Though the report was ordered by Crist and the Cabinet -- meeting Tuesday as the state Financial Services Commission -- they offered few comments other than pledges to improve oversight.

''There was no enforcement mentality at OFR, and the report bore that out,'' said Chief Financial Officer Alex Sink, the first elected leader to call for Saxon's ouster. She added that the agency needs a ``fresh set of eyes and new leadership.''

She and other commission members passed emergency measures last month in response to The Herald's investigation, including rules that automatically ban felons convicted of financial crimes from selling homes.

In addition to tougher standards, Sink said she's considering pressing for the restoration of a state victims fund that would help reimburse people scammed by mortgage brokers.

The Miami Herald found the state guaranty fund was killed by regulators more than a decade ago, partly because it became too cumbersome to manage.

Sink said she wasn't aware of the program previously, but said it's ``an idea we ought to revisit.''

More measures are expected to be drafted before next year's legislative session that will address some of the problems brought out in Tuesday's report as well as The Herald's series.

The newspaper found that more than 10,000 people with criminal histories -- including bank robbers and land swindlers -- were able to peddle home loans across the state this decade. Of those, more than 4,000 cleared OFR background checks despite criminal pasts, with most committing offenses that state law required the agency to screen -- fraud, dishonest dealing and crimes of ``moral turpitude.''

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