Newly approved legislation criminalizes mortgage fraud for the first time in Florida, where the crime has reached epidemic levels in the wake of a real estate boom fueled in part by risky loans.

Florida leads the nation in mortgage fraud, and Miami-Dade and Broward counties lead the state.

Senate Bill 1824 would make m?ortgage fraud a third-degree felony punishable by up to five years in state prison. If two or more properties are involved, the crime would be a second-degree felony punishable by a possible 15-year sentence. If signed by Gov. Charlie Crist, the law would take effect Oct. 1.

Cases have been prosecuted up to now under grand theft and wire fraud laws.

The definition of mortgage fraud includes filing bogus documents with county clerks. The clerks of court maintain property ownership records, in an attempt to crack down on quitclaim deed fraud.

This type of fraud is as easy as filing fake papers indicating a change of property ownership with county clerks. Fake deeds are offered to lenders during a refinancing process, the new "owners" walk away with cash, and the victimized owners often are clueless.

The legislation grew out of identical bills sponsored by Democratic state Sen. Gwen Margolis of Bay Harbor Islands and Democratic state Rep. Dan Gelber of Miami Beach.

During the session that adjourned Friday, the bills were folded into a broader mortgage bill calling for increased notification to borrowers about fees and the loan process.

The final version was sponsored by the Senate Commerce and Banking and Insurance committees, Margolis and state Sens. Mike Fasano, R-New Port Richey, and Evelyn Linn, R-Daytona Beach.

Miami-Dade police Sgt. Richard Davis, who has been chasing white-collar criminals for years, warned real estate professionals at a mortgage fraud seminar last week in Miami that they need to help stop a mortgage fraud epidemic or risk being blamed.

"If you want to see people not trust Realtors, let this go on. They already have suspicions about Realtors," Davis told the seminar attended by about 100 members of the real estate industry.

Florida Real Estate Commissioner Nancy Hogan wants real estate agents to take more responsibility for the paperwork they handle.

Too many people involved in transactions -- from buyers and sellers to mortgage brokers, appraisers and title agents -- "turn their heads, and we allow it. We have to stop thinking the commission comes first," Hogan said at the seminar hosted by the Realtor Association of Greater Miami and the Beaches.

"It enrages me that people think we are so greedy and stupid as to allow this," said Hogan, managing broker of Coldwell Bankers' San Remo Avenue office in Coral Gables.

Mortgage fraud can range from falsified income statements and fake deed transfers to rings of salespeople, appraisers, mortgage brokers and title agents who concoct fake buyers to get homes and loans.

The eagerness of lenders to make risky loans during the residential run-up is coming back to haunt them in delinquencies and foreclosures.

Agents and brokers often are the first to see suspicious purchase contracts and are in a position either to keep

them from going forward or to report them to regulators and police.

Davis wants to establish a Miami-Dade clearinghouse for salespeople, title agents, mortgage brokers and appraisers to consult with each other, learn how to spot fraud and report it.

"Their total concentration should not be on making a dollar," he said after the meeting. "A lot of them unknowingly and knowingly are breaking the law. We don't want to hear 'I didn't know about that.'

The Miami association has formed a task force to educate members about fraud tactics and evidence.

The Realtor Association of Greater Fort Lauderdale has begun bilingual educational seminars about mortgage fraud and foreclosures, chief executive Richard Barkett said.

"What to look for and recognize is one step" in remedying the problem, he said.

Salespeople are being asked to watch for any special requests by buyers and sellers or contract add-ons, notably cash-back deals giving buyers tens of thousands of dollars in cash at closing.

Sellers get more for a property than it's worth, buyers get extra cash for repairs, credit card bills or purchases, salespeople reap bigger commissions and lenders chalk up a heftier loan at a higher interest rate.

But Davis said it's fraud if the lender doesn't know about the cash-back aspect.

A cash payback of $100,000 to buyers getting 100 percent financing isn't uncommon and should prompt calls to lenders, Hogan said. But mortgage professionals say they often aren't aware of cash-back deals.

Casting responsibility elsewhere, real estate agents point to mortgage brokers and other loan originators as the culprits, but often the brokers and lenders are the ones being burned, said Raymond Reyes, head of the Miami chapter of the Florida Association of Mortgage Brokers.

Real estate agents often hide cash-back arrangements in contract addendums that aren't seen by mortgage brokers and lenders, said Michelle LaPiana, an account executive with CIT Consumer Finance in Maitland and former president of the Florida Association of Mortgage Brokers.

The trick also keeps side deals off the federally mandated HUD-1 settlement statement.

Davis said he's seen cash-back deals prepared by attorneys who didn't want the funds reported on the HUD-1 forms because they knew lenders wouldn't approve the loans.

Reyes, managing director of Express Equity Lending Group in Coral Gables, extended the blame up the lending chain to creditors and banking regulators who allowed subprime loans to proliferate.

A report by First American Loan Performance ranked the Miami area as having the nation's fourth-highest rate of subprime loans at 23 percent.

About 13.5 percent of mortgages originated in the U.S. last year were subprime, five times higher than the 2.6 percent approved in 2000, according to the Mortgage Bankers Association.

"Greed started at the top with the creditors and has trickled down to licensees," Reyes said.

There would be a smaller mortgage market if the secondary mortgage market didn't buy and securitize the loans, he said.

Jorge Cantero, a broker-associate with Esslinger Wooten Maxwell in Miami, acknowledged real estate agents help perpetuate mortgage fraud, but said enforcement isn't guaranteed even when fraud is reported.

"Very few people like to get involved ... and no one wants to be called a snitch," he said. "When you finally step forward and put yourself in the limelight ... then comes the frustration when nothing happens. You get caught in the wheels of bureaucracy, and the bureaucracy hardly does anything."