With Florida's housing boom revving up, Joseph Falk, the national mortgage industry's top leader, went to Florida regulators in 2002 with an urgent plea: License all mortgage professionals.
Falk, worried about a frenzy of fraud cases, said too many people were able to jump into the industry -- including loan originators -- without criminal background checks and competency exams.
But regulators refused to press for the changes in the ensuing years, saying lawmakers wouldn't support more industry restrictions.
Since then, thousands rushed into the business -- including more than 4,000 with criminal records, a Miami Herald analysis shows.
Sign Up and Save
Get six months of free digital access to the Miami Herald
In the ensuing four years, the mortgage industry exploded in fraud cases, but efforts to license the growing ranks of loan originators -- many later caught in fraud schemes -- failed.
In 2006, industry leaders again approached the Florida agency that could license loan originators and require background checks.
Patrice Yamato, then president of the Florida Association of Mortgage Brokers, and other industry executives met in Tampa that July with leaders of the state Office of Financial Regulation, including Commissioner Don Saxon and Finance Director Robert Tedcastle.
''They said they would consider it,'' Yamato recalled.
Her timing was good. Mortgage fraud cases were rising in Florida -- to the highest rate in the country, according to the Mortgage Asset Research Institute.
Internally, even a top OFR lawyer acknowledged that originators were a growing problem. In a 2007 e-mail obtained by The Miami Herald, OFR General Counsel Robert Beitler wrote to colleagues about problems with ''loan originators who aren't licensed.'' He noted: ''We have to threaten or beg the licensed entity to do something about their employment. And we don't really have a lot of leverage.''
Yet, as the legislative session was about to start in March 2007, Yamato received her answer from Saxon. ''He said the Legislature would not support it,'' she said. ''He felt it would not get through committee. It would not even get to the floor because there was so much resistance.''
But other e-mails and correspondence show that internally, key leaders at the OFR didn't favor changes.
In October 2006, five months before Yamato was told that the Legislature opposed licensing, Tedcastle e-mailed OFR staffers, saying he had removed provisions in a proposed law requiring that employees of lenders -- loan originators -- be licensed.
''Current information indicated that there may have been as many 40,000 + individuals that would have needed to become licensed,'' Tedcastle calculated. ''At $200 + fingerprinting costs the fiscal impact would have been at least $6,000,000.''
In March 2007, Andrea Moreland, the OFR's legislative affairs director, came across a memo written by the Florida Association of Mortgage Brokers, saying the OFR was supporting the licensing of loan originators.
Moreland dashed off an e-mail to Saxon, Tedcastle and others: 'I am concerned that they have stated that OFR is `urging' licensure of all loan originators. I think I need to contact Karen to have them remove that from their talking points.'' Tedcastle responded: ''I concur.''
No legislation was proposed in that session. Neither Tedcastle, who retired recently, nor Moreland responded to recent requests for interviews about the e-mails.
With the mortgage crisis unfolding nationally, Congress began to push the issue last year.
In November, the House Financial Services Committee, chaired by Rep. Barney Frank, D-Mass., approved legislation that would require states to license all mortgage professionals and mandate criminal background checks, exams and a ban on felons. It's now part of a larger housing bill under consideration in Congress.
Saxon sent a letter to Rep. Ginny Brown-Waite, a Florida Republican on the committee. He expressed support for the idea of licensing and minimum standards but insisted that states should have the final say on who gets licensed.
''The Office would oppose any attempt to preempt the ability of states to make licensing determinations,'' the letter reads. ''States have always been at the forefront of consumer protection and are in the best position to determine who should be granted a license to conduct business in their state and under which conditions.''
Saxon told The Miami Herald last week that he was well aware of the state brokers' long-standing support of the changes. But he repeated his assertion that his office never pushed for legislation because it would never pass: ''If no likelihood to get it passed, no point in doing it.''
When asked who opposed the idea, he could not recall. ''I don't have any specific names,'' he said.
Several key legislators contacted by The Miami Herald, however, said they don't remember the OFR raising the issue.
State Sen. Bill Posey, R-Rockledge, who chaired the Banking and Insurance Committee for the past two years -- it's the panel that considers legislation on the mortgage industry -- said the issue never came up in committee discussions. He added that he didn't know loan originators are not licensed. ''If you do what a mortgage broker does, you should have a license,'' Posey said.
State Rep. Dan Gelber also said he was unaware of any issues raised by the OFR on the licensing of loan originators. ''There should have been a debate on this in the Legislature,'' said Gelber, D-Miami Beach, the House minority leader. ''Obviously, disqualifying felons from originating home loans makes sense.''
Falk said he launched his campaign for licensing in 2002 because he noticed that mortgage fraud was on the rise at the same time the industry was undergoing its largest expansion.
''We saw it rear its ugly head in the late 1990s and then continue,'' he said. ''We have been pushing for six years.''