Go to the mobile version of this Web site.

Login | Contact Us | Site Map | Paid archives | Electronic edition | Subscription Questions | Extras

Senate backs bill setting fines on mortgage brokers

April M. Washington, Rocky Mountain News

Published April 25, 2007 at midnight

Text size  

More Colorado Government

More stories »

Mortgage brokers could face stiff fines for knowingly making loans to home buyers who can't reasonably pay the mortgage, under a bill passed by the Senate Tuesday.

Most Republicans argued the measure will choke off home loans to hundreds of Coloradans with tainted credit and make it harder for seniors and homeowners to obtain home-equity loans.

"It's economic redlining people with weak credit," said Sen. Shawn Mitchell, R-Broomfield.

The measure won the Senate's initial approval on voice vote. Sen. Steve Johnson, R-Fort Collins, joined Democrats in supporting the bill.

Senate Bill 216, by Sen. Jennifer Veiga, D-Denver, is meant to reduce skyrocketing foreclosure rates in Colorado and crack down on those who take advantage of homeowners who can barely afford their house payments.

Veiga said the bill requires mortgage brokers to act in "good faith" when determining a borrower's ability to repay what are commonly known as subprime, nontraditional home loans. Many have adjustable rate mortgages in which the payment mushrooms when interest rates jump.

"We should have a higher standard for mortgage brokers," Veiga said. "What we find in some of these option ARMs is that brokers are not looking at the borrower's ability to pay. It's having stark consequences here in Colorado."

SB 216 is one of two Senate measures introduced this session that target predatory lending practices.

Senate Bill 203, by Sen. Peter Groff, D-Denver, passed the Senate last week and requires mortgage brokers to get a license before they do business in Colorado.

Veiga said that in 2006 the state reported 54,000 foreclosure filings, an 85 percent increase from 2005.

Under the bill, brokers who prey on homeowners could face penalties of up to $2,000 per violation or up to $10,000 per violation if the victim is over age 60.

Mitchell and Ted Harvey, R-Highlands Ranch, a mortgage broker, said the measure forces brokers to act as "judge and jury" by requiring them to determine a borrower's "personal circumstances" and credit worthiness before processing a loan application.

Harvey warned the measure will cripple the state's mortgage lending and home-building industry if it becomes law.

or 303-954-5086