TALLAHASSEE -- Embattled state mortgage regulator Don Saxon, whose agency allowed thousands of former criminals to sell loans in Florida, abruptly resigned Tuesday as the state Cabinet debated his fate.

After Saxon unveiled emergency changes to toughen the state's licensing rules for mortgage brokers, Chief Financial Officer Alex Sink called for his resignation for the second time in three weeks.

This time, Gov. Charlie Crist seconded the motion.

Before they could vote, Saxon interrupted, offering to step down effective Sept. 30, signaling the end of a state government career that began 33 years ago.

The resignation comes three weeks after a Miami Herald series revealed his Office of Financial Regulation -- created to protect consumers -- permitted bank robbers, money launderers and cocaine traffickers to obtain mortgage broker licenses during the most explosive housing boom in state history.

Those ex-criminals went on to steal millions from consumers, the newspaper found.

Saxon mounted a sprited defense, issuing a 40-page rebuttal to the newspaper series, which claimed permissive state laws and a lack of resources kept his agency from doing more to protect the public.

CONFIDENCE `SHAKEN'

After listening to a summary of that report at a Cabinet meeting two weeks ago, Crist said his confidence in Saxon was ``shaken.''

On Tuesday the governor said nothing he has learned since then has changed his mind.

''I think what happened today was appropriate and just,'' Crist said.

Saxon had been under criticism since the newspaper began publishing its series last month showing flaws in the state's licensing system.

On Sunday, the newspaper's latest installment revealed that Saxon's agency failed to revoke licenses from brokers even after they were caught committing fraud, the most serious offense under state law.

For Sink, that was the last straw: ``The bad news just kept coming.''

Saxon, 57, is a career regulator who became commissioner of the OFR when it was created in 2003, overseeing the mortgage, banking and securities industries.

NO WARNING

Top state lawmakers reserved their sharpest criticism of him for failing to warn them about the problems brewing in his agency during a mortgage crisis that contributed to the state's economic decline.

The Herald series revealed that the OFR licensed more than 4,000 brokers with criminal histories, including offenses state law specifically required the agency to look for in criminal background checks.

Those brokers went on to commit at least $85 million in mortgage fraud, The Herald found. Two weeks ago, Saxon told the Cabinet his agency reviewed the criminals' applications on a ''case by case'' basis.

One of those cases involved Tampa broker Scott Almeida, who admitted on his application that he had just come out of federal prison for cocaine trafficking. One of his character references: his mother.

OFR granted his license in 2003, and he went on to fleece nearly $3 million from 30 people, most of them elderly and disabled.

Just before his resignation at Tuesday's meeting, Saxon proposed an emergency rule change that would ban felons convicted of financial crimes from the mortgage industry for life.

The rule, which expands on a federal law passed last month, would also impose long waiting periods on people convicted of violent crimes or financial misdemeanors.

SOME CONCERNS

Cabinet members voted 4-0 to accept the emergency rule, despite some concern about whether they could impose all of its measures without legislative approval.

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