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.
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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 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.''
Kafka, 48, joined America's Best Lending in Boynton Beach in 2004 after living in a halfway house.
While his federal probation officer said in court records that Kakfa should not be working in the mortgage industry, he went on to join two other firms without disclosing his past.
Two years after he began to peddle mortgages, he was convicted of cheating lenders of $2.7 million in loans at America's Best Lending by inflating incomes, boosting assets and misrepresenting other finances.
''You never would have guessed it,'' said Philip Sencer, who hired Kafka at a Wellington firm in 2006. ''He was the type of guy you'd invite to your home for a barbeque.''
BURDEN ON LENDERS
State regulators say they don't license loan originators, but they regulate those who hire them: mortgage lenders. The 1991 law allowing originators made it clear: The burden is on the lenders to ensure that everyone follows the law.
If a lender refuses to act on complaints against a loan originator, the state can discipline the lender, said Terry Straub, recently appointed director of the Office of Financial Regulation's Division of Finance.
''We hold them accountable,'' he said. But The Miami Herald found that in at least nine major cases when originators were arrested for mortgage fraud, no action was taken against their lenders.
While Florida requires lenders to report the names of their loan originators every quarter, the newspaper found that hundreds of companies don't follow the law. In the first half of 2005 -- during the peak of the boom -- 355 didn't file required reports, according to the state's own records.
Falk, the former president of the National Association of Mortgage Brokers, said the lack of reporting in the state system allows too many gaps.
The lack of tracking leads to even more problems: Without any central registration and with no requirements for entry, loan originators with criminal histories can move from firm to firm without divulging their past.
There is no state law requiring lenders to check their background.
If they had, they would have found that Kafka spent nearly three years in federal prison for loan fraud in 1999 and illegally keeping an arsenal of guns and ammunition while a resident of Ocean Ridge, near Boynton Beach.
Sencer, who hired Kafka at Financial Security in Wellington, said he learned of Kafka's police record only after federal Alcohol, Tobacco and Firearms agents showed up at his office in 2005. Sencer said that when he met with prosecutors, 'they told me, ''You got duped.' ''
Assistant U.S. Attorney Neil Karadbil, who prosecuted Kafka, said the former loan originator was able to conceal his past while peddling loans, partly because he didn't have to submit to criminal background checks.
''There has to be some way to know in this industry whether you're dealing with a convicted felon,'' Karadbil said. ''At least borrowers or employers should know that.''
Even before his latest conviction, Kafka had a criminal record dating to 1977, including 15 arrests and four felony convictions, court records show. The charges include grand theft, burglary and possession of contraband in prison.
He is now back in prison -- serving 57 months -- for the most recent mortgage scheme.
A NEW CALLING
Harry Rolle was a convicted felon who had declared personal bankruptcy three times before he became a loan originator in 2001 for International Lenders of South Florida in Oakland Park.
Within months, he found his first victim: Elsa Erarte, a single mother who worked at Walgreens in Miami. Rolle pocketed a $16,000 down payment she had given him while he was supposed to help her find a home, saying it was nonrefundable.
She sued Rolle in Miami-Dade Circuit Court and got her money back in a judgment in 2004. ''It was all the money she had,'' recalled her attorney, Joel Friedman. ''She had spent years saving it.''
But the court case didn't stop Rolle.
The 53-year-old loan salesman went on to cheat four more borrowers through a variety of means: pocketing their down payments, skimming from their loans, and selling their homes without their approval, court records state.
''The guy was a consummate con artist,'' said Joseph Wilson, an investigator for the Office of Financial Regulation, who referred the case to police. ''He had the ability to gain people's confidence by saying what people wanted to hear.''
In 2005, the Miami-Dade County state attorney's office finally prosecuted Rolle as a habitual offender on fraud charges -- for ripping off Erarte and others. A judge gave him a year in jail.
Under state law, there is nothing to stop loan originators convicted of ripping off borrowers from returning to the industry.
Because they aren't licensed, there are no records of discipline or past crimes involving money or moral turpitude -- and no files for public inspection.
Bernard Williams, who pleaded guilty to stealing $6,000 from two elderly women -- the bills ripped from the seams of their clothes -- said he found the easiest route to sell home loans by becoming a loan originator in 2001.
''I didn't have a problem getting in,'' he told The Miami Herald.
Williams, 54, said he decided to sell loans because the market was booming and he knew that ''there was money to be made.'' Over the next five years, he worked for three separate lenders.
But while he was writing loans for dozens of working-class families, he and several co-conspirators were accused by Florida's attorney general of fleecing 80 people of nearly $2 million, according to a civil fraud suit filed in Broward County Circuit Court in January.
The suit says Williams, who has not been criminally charged, joined others in a scheme to siphon money from loans designed to save people from losing their homes. Like Pamela Simmons, several claim that Williams put their homes up for sale without their permission. He and others then pocketed tens of thousands of dollars in profits in each case by charging inflated fees, the suit alleges.
''I worked hard -- three jobs -- to get that house,'' said Simmons, 40, who has five children.
Williams insists he did nothing wrong, saying the suit will be resolved in his favor. ''This is all a headache,'' said Williams, who continues to work as a loan originator in North Miami-Dade.
He refused to talk about his guilty plea in 1994 for stealing from two elderly women, drawing a 30-day sentence and five years of probation.
As the housing boom exploded in 2001, so did the number of people rushing into the mortgage industry, with loan originators leading the way. But as their numbers rose each year -- 66 a day in 2005 -- so did the number of former criminals.
With home sales rising more than 20 percent a year in parts of Florida, mortgage companies were hiring loan originators at an unprecedented rate, state records show.
''Back then, it was such a feeding frenzy,'' said David Velazquez, 37, a former loan originator in Broward who served time in prison for drug trafficking. 'People were saying, `We need loan originators. We'll train you.' It was so busy. They were pulling in anyone they could.''
In all, more than 5,300 people with criminal histories rushed into Florida's mortgage industry as loan originators since 2000. Even for people who had five or more convictions, there were no impediments to getting in.
According to state Department of Corrections data and county court records:
Brian Lendin served six prison terms totaling a dozen years between 1983 and 2000 for crimes including grand theft, manslaughter and aggravated battery.
Rosendo Perez was convicted of mortgage fraud, grand theft and forgery between 1990 and 2000.
Ronald D. Collins was convicted 37 times between 1983 and 2000 on charges including grand theft, forgery and writing worthless checks.
The Miami Herald also found 31 instances of people with stripped or denied mortgage-broker licenses who managed to get work as loan originators. Others were turned down over incomplete applications.
Florida denied Antonio Ramos a broker's license in 2004 after he failed to submit his arrest record and other documents on his prior crimes. On his state application, he admitted a grand-theft conviction, explaining he was young at the time: ''Please accept me, because I am honest and want to be a success in the future.''
Ramos became a loan originator.
Over the next three years, prosecutors say, he and several co-conspirators embarked on a massive fraud spree targeting luxury homes in Broward County. They inflated home values in Southwest Ranches and used straw buyers to rip off lenders for $8.3 million.
Ramos is serving 60 days of home detention and four years of probation.
The Miami Herald also found that 22 brokers stripped of their state licenses returned as loan originators. Among them: four charged with felonies while working as mortgage brokers, two who dipped into their clients' accounts, and three who were charging excessive fees.
Chris Francis said he knew that he had to become a loan originator to get into the business in 2002. The reason: He had spent nearly a year in federal prison for a $4 million mortgage fraud in Maryland.
''I did my homework, and this was my way in,'' said Francis, who works for a lender in Lee County. He's now in charge of compliance for his firm. ''Who better than me to make sure everything is done right?'' he said.