TALLAHASSEE, Fla. — During the Florida real estate boom of the mid-2000s, one of the most lucrative ways to make a living — or commit fraud — was to be a mortgage broker.
More than 82,000 Floridians were licensed just four years ago, but the collapse of the housing market, stronger licensing requirements and background checks, and tougher loan requirements have cut that number by roughly 90 percent: the state currently licenses about 10,600 loan originators, as the profession is now called.
Most got out of the business or moved elsewhere. Some of the small percentage who committed crimes went to prison.
"Everybody wanted to be a mortgage broker or a Realtor, because it was just being an order taker," said Mike Ferrie, a Tallahassee real estate agent and district vice president for the Florida Board of Realtors. "It was easy pickings. When the bottom hit, it got a lot more realistic."
Mortgage brokers, renamed loan originators by new legislation, are responsible for verifying that loan applicants are financially qualified. They are paid a commission by the lender, typically between 0.5 and 1.25 percent of the loan or $500 to $1,250 per $100,000. They may also work for banks or even double as real estate agents.
In Florida, many were committing fraud. For the past two years, the state has led the nation by far in mortgage fraud and has been at or near the top in many prior years. Florida accounted for more than 27 percent of all home loans nationally that were investigated in 2010, the LesixNexis Mortgage Asset Research Institute reported in May.
In 2008, The Miami Herald found that the state had licensed 4,000 brokers who had criminal backgrounds, with members of that group committing $85 million in fraud. Many of them were setting up straw buyers to qualify for mortgages and then stole the money.
Cases like these led to more regulation.
A Florida law that took effect late last year ramped up requirements for brokers and lenders. They now must renew their licenses annually, and the cost of the application fee and collateral costs increased $50 to $332. The renewal cost is $254, an increase of $104. The new laws also require annual criminal background checks for license renewals and disqualify people from ever obtaining licenses if they've been convicted of any felony that includes fraud.
On the federal level, the Dodd-Frank Act passed last year put new restrictions on the types of mortgages that can be written and removed lender incentives for steering borrowers to high-cost loans. The feds in 2008 also passed the SAFE act, which requires each loan originator to complete 20 hours of pre-license education and an additional eight hours of continuing education each year.
Broker Linda Knowlton said the system has swung from one extreme to the other.
"There just weren't any checks and balances in the system," said Knowlton, vice president of Mortgage Group Services in Fort Myers. "There are now so many it's sometimes difficult to do your jobs."
But even with the tougher regulations, the crime continues. In late April, state law enforcement officials announced they had arrested five people in Tampa for their roles in a mortgage fraud scheme. Fifty fraudulent residential mortgage loan applications and associated documents allegedly were sent to lenders in several counties in west-central Florida.
Just a month earlier, state authorities and the Flagler County Sheriff's Office arrested 11 people from the Miami area on racketeering charges after a two-year investigation. That case also allegedly involved mortgage brokers in Flagler, Volusia and Lake counties in east-central Florida. The investigation, named "Operation Fast Cash Kickback," found falsified appraisals among several other schemes.
The penalties can be severe. Earlier this year, the former president of a New Jersey-based mortgage company was sentenced to 14 years in federal prison for orchestrating a $136 million fraud.
But even for honest brokers, it has been a tough business to stay with.
Kristi Endres earned some $250,000 annually for three straight years from 2004 to 2006 writing mortgages in the overheated Fort Myers market. The housing bust not only got her, but her husband, John, who had a profitable excavating business in southwest Florida, the part of the state hardest hit by the housing crisis.
"We pretty much lost everything," said Endres, who is living this summer in Madison, Wis., where her husband has found work. "Before we lost every dime we ever had we finally decided we had to pack it in."
They sold their waterfront home for a third of the once-appraised $750,000 price and are buying a 40-foot motorhome so they can travel to places where they find work.
She has returned to school and earned a degree so she can work as a physicians' assistant. "We all take our hard knocks and learn from it," said Endres, who lived in Florida for 28 years and still returns for winters and maintains residency in the state.
"Our story is very similar to a lot of