New Colorado Mortgage Broker Regulations Already Pull 10 Licenses
A new Colorado state law designed to help prevent millions of dollars in scams and fraud has officially taken effect - and already has prevented 10 people from continuing business as mortgage brokers, the Rocky Mountain News reports this morning.
Some 3,465 Colorado mortgage brokers have been required to register under the Morgtage Brokers Registration Act, which took effect on January 1, said Geoffrey Hier, spokesman for the Colorado Department of Regulatory Agencies.
Another 516 mortgage broker applications, as of Wednesday, were waiting to have background checks completed, one of the requirements for registration.
“It is too early to tell whether it is working because it has only been in effect for 16 days,” Hier said of the new legislation on Tuesday, adding that no matter what, it’s a positive step.
“If nothing else, we have some idea of who is out there, which we didn’t before. It’s a good start. We’ll never know how many people didn’t apply because they knew they wouldn’t qualify.”
Legislators passed the law last year after concerns continued to rise about record Colorado mortgage defaults and foreclosures, some of which can be traced to real estate scams and predatory lending.
A RealtyTrac study released Tuesday said that the Rocky Mountain State once again had the highest foreclosure rate in the country in December.
Prior to the passage of the law, Colorado and Alaska had been the only states in the nation with no regulations regarding mortgage brokers.
Under the new state law, brokers with federally chartered lenders and FHA home loan and VA-loan approved lenders aren’t required to register. The division of real estate so far has exempted 142 companies.
Those who register must be fingerprinted, undergo criminal investigations by the FBI and the Colorado Bureau of Investigation, and post a $25,000 surety bond, which typically costs about $200.
Also, there is a $200 registration fee, so the division has raised more than $680,000, which will be used to help administer the program.
Erin Toll, head of the state’s real estate division, also noted that for the first time, consumers can go to the Colorado Division of Real Estate’s official site and lodge a complaint against mortgage brokers.
One of those who was already denied is Steven Thompson, who in 2003 was accused of abusing buyers in the Colorado housing market and bilking residents out of $1 million-plus via his sophisticated mortgage scams.
Jim Spray, a mortgage broker himself and longtime advocate of cracking down on fraud amongst Colorado mortgage brokers, helped several homeowners in their efforts to investigate Thompson in 2003.
“If the others were denied for similar reasons as those which caused denial of Mr. Thompson, Colorado home loan holders should feel very relieved this new law is working as intended,” Spray said. “This seems to be getting rid of the worst of the worse mortgage brokers in the state.
“If someone can’t afford $200 to get a bond, they need to get out of the mortgage business and go work at a car wash. I have seen a million dollars disappear in mortgage fraud in a week.”