By John Rebchook, Rocky Mountain News February 24, 2007
Two state lawmakers plan to introduce bills on Monday that would require mortgage lenders in Colorado to be licensed, as well as other requirements designed to "put some teeth" into measures to help stem the foreclosure tide sweeping the state.
Denver Democrats Rosemary Marshall, a representative, and Peter Groff, president pro tem of the Senate, will introduce the bills.
Marshall said Groff would introduce the licensing bill and she would carry it in the House. Democrats have championed such legislation for years, but efforts to pass it were shot down when Republicans controlled the House and Senate.
Marshall said she will introduce legislation that would "close the loophole" that exempts Federal Housing Administration lenders from registering with the state.
Until last year, Colorado was one of only two states that did not regulate lenders. Now, mortgage brokers are regulated by the Colorado Division of Real Estate.
The bills also would require lenders, for the first time, to consider the financial suitability of borrowers before making loans.
Attorney General John Suthers' office is investigating a case in which an elderly person on a fixed income of $860 a month was talked into swapping a $400 monthly mortgage payment for one that has risen to more than $1,100 per month.
"There are a lot of unscrupulous brokers out there, and we are trying to ensure that some of the methods they are using to beat people out of the biggest investment they will ever make won't happen," Marshall said.
"Really what we are trying to do is put some teeth into our laws," she added. "You know, the FBI has identified Colorado as one of the top 10 hot spots in the country for mortgage fraud. . . . These laws will allow the Division of Real Estate to fine offenders or revoke their licenses."
Also, she said, lenders should not be allowed to advertise bait- and-switch loans. A recent ad, for instance, promoted a 0.25 percent loan.
"Oh, yeah. Just try to get that loan," Marshall said.
More than 19,000 foreclosures, a record, were filed in the Denver area last year.
People losing their homes to lenders is "absolutely a huge issue" with her constituents, Marshall said.
"I represent some really vulnerable populations, where there are a lot of refinancing and first-mortgage schemes happening," she said. "But it is not just happening to the unsophisticated borrowers. These schemes are so varied and so complex, very sophisticated people also are falling prey to them."
Chris Holbert, president of the Colorado Mortgage Lenders Association, said the proposal may cause a number of "unintended consequences."
Costs, for instance, could be raised for many small businesses, costs that will be passed on to consumers, he said. In additiion, the licensing of brokers in other states, he said, has not reduced fraud or foreclosures.
While suitability requirements make sense for securities, it doesn't for loans, he said, "because the money is moving the other way."
That is, if you invest in a stock or a partnership, you are handing over your money, but with a loan, the lender is giving you money. While it sounds benign, this measure ultimately could reduce the number of lenders willing to make loans here, driving up prices, Holbert said.
Mortgage lender Jim Spray, however, applauded the measures.
"I've been calling for the licensing of mortgage brokers for more than 10 years," Spray said. "It's only logical to get rid of the FHA exemptions. And it is just stupid for a lender to be making loans when they know the borrower can't pay it back."
Spray said measures such as those being proposed never had a chance when Republicans controlled the statehouse.
"Now, with Democrats in control and a Democratic governor, it is an ideal time to get these laws on the books," he said. "This is huge."
rebchookj@RockyMountainNews.com or 303-954-5207
Two state lawmakers plan to introduce bills on Monday that would require mortgage lenders in Colorado to be licensed, as well as other requirements designed to "put some teeth" into measures to help stem the foreclosure tide sweeping the state.
Denver Democrats Rosemary Marshall, a representative, and Peter Groff, president pro tem of the Senate, will introduce the bills.
Marshall said Groff would introduce the licensing bill and she would carry it in the House. Democrats have championed such legislation for years, but efforts to pass it were shot down when Republicans controlled the House and Senate.
Marshall said she will introduce legislation that would "close the loophole" that exempts Federal Housing Administration lenders from registering with the state.
Until last year, Colorado was one of only two states that did not regulate lenders. Now, mortgage brokers are regulated by the Colorado Division of Real Estate.
The bills also would require lenders, for the first time, to consider the financial suitability of borrowers before making loans.
Attorney General John Suthers' office is investigating a case in which an elderly person on a fixed income of $860 a month was talked into swapping a $400 monthly mortgage payment for one that has risen to more than $1,100 per month.
"There are a lot of unscrupulous brokers out there, and we are trying to ensure that some of the methods they are using to beat people out of the biggest investment they will ever make won't happen," Marshall said.
"Really what we are trying to do is put some teeth into our laws," she added. "You know, the FBI has identified Colorado as one of the top 10 hot spots in the country for mortgage fraud. . . . These laws will allow the Division of Real Estate to fine offenders or revoke their licenses."
Also, she said, lenders should not be allowed to advertise bait- and-switch loans. A recent ad, for instance, promoted a 0.25 percent loan.
"Oh, yeah. Just try to get that loan," Marshall said.
More than 19,000 foreclosures, a record, were filed in the Denver area last year.
People losing their homes to lenders is "absolutely a huge issue" with her constituents, Marshall said.
"I represent some really vulnerable populations, where there are a lot of refinancing and first-mortgage schemes happening," she said. "But it is not just happening to the unsophisticated borrowers. These schemes are so varied and so complex, very sophisticated people also are falling prey to them."
Chris Holbert, president of the Colorado Mortgage Lenders Association, said the proposal may cause a number of "unintended consequences."
Costs, for instance, could be raised for many small businesses, costs that will be passed on to consumers, he said. In additiion, the licensing of brokers in other states, he said, has not reduced fraud or foreclosures.
While suitability requirements make sense for securities, it doesn't for loans, he said, "because the money is moving the other way."
That is, if you invest in a stock or a partnership, you are handing over your money, but with a loan, the lender is giving you money. While it sounds benign, this measure ultimately could reduce the number of lenders willing to make loans here, driving up prices, Holbert said.
Mortgage lender Jim Spray, however, applauded the measures.
"I've been calling for the licensing of mortgage brokers for more than 10 years," Spray said. "It's only logical to get rid of the FHA exemptions. And it is just stupid for a lender to be making loans when they know the borrower can't pay it back."
Spray said measures such as those being proposed never had a chance when Republicans controlled the statehouse.
"Now, with Democrats in control and a Democratic governor, it is an ideal time to get these laws on the books," he said. "This is huge."
rebchookj@RockyMountainNews.com or 303-954-5207
For More Housing Information go to www.ColoradoDreamHomes.net
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