Jeff Rickard

What is happening in the mortgage business these days as a result of the rising foreclosure rates and the increase in Colorado’s fraudulent loan rankings?

The answer is “a whole lot”! On Friday June 1^st, 2007 multiple House and Senate bills were signed into law by the Governor. These bills are an attempt to make sure that the consumer is protected and fully educated to the loans that they are acquiring. They are also making an effort to rein in aggressive and often abused loan qualification guidelines, as well as, mortgage brokers who are not considering the buyers “true” ability to qualify for a loan.

Many months ago a bill was passed that required all mortgage brokers to be registered with the Division of Real Estate, this bill did have an exception to the rule that allowed employees of FHA lenders and correspondents to be exempt from the process. That has now changed, that exemption has been removed. So all loan officers are now going through the process of registration. That includes fingerprinting, background checks and posting a $25,000 bond. Loan officers from national bank firms are still exempt from that process.

Another bill that was signed into law on June 1^st was House Bill 07-1322. This bill covers a lot of territory but here are some of the highlights. The main focus of this bill is to make sure that borrowers/buyers are protected from deceptive practices and that loan officers are held responsible if there is not a tangible net benefit for a borrower to do a loan. The loan officer also has to make reasonable inquiry into income, debts and any other pertinent information. What does this mean in the real world? In the past there were loan officers that would ignore certain information, exaggerate certain information, or they would change the loan documentation type so they would not have to ask a borrower a question that the loan officer knew would cause a problem. Our industry liked to call it “structuring a deal” If the underwriter did not figure it out, they were in the clear. That is no longer the case. A loan officer found to have participated in this deception will now be held personally accountable by the State at a 3X damages level. A further provision in this bill makes it mandatory that all claims “shall” be investigated. That is very different from the past where a claim “could” be investigated. By the way, the State did approve the budget to hire more investigators. This bills also covers that mortgage companies can not advertise loan terms that are actually unavailable to entice phone calls. The other major portion of this bill states that you can not charge fees that were not previously disclosed unless the fees were unforeseeable and a three day advance notice of fee change was given. These are highlights of this bill and it does contain a great deal more information.

Senate bill 07-216, which became law on July 1^st, states many of the same things as the previous bill but also adds that if you are using interest only loans or “exotic” adjustable rate programs that fully amortized payments are used for qualifying. If a borrower wants a lower initial payment, that is fine as long as they can qualify now for the full payment.

Senate bill 07-085 is very interesting and states that no one can influence an appraiser anymore. What does influence mean? That is up to interpretation but there are rumors that appraisers will not even see sales prices anymore on contracts. The days of saying “I know an appraiser that can get us that value” are going away.

Finally, Senate bill 07-203 brings loan officers into the reality of the Real Estate agent. By 2009 continuing education and testing becomes a requirement for loan officers.

There are many changes happening in our industry and they came upon us in a rush. These laws will have a major effect on how we do business in Colorado and you can be sure as a real estate agent you will be caught up in the changes too.

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