Suthers unveils mortgage fraud legislation
John Rebchook, Rocky Mountain News
Published January 8, 2007 at midnight
Today, Attorney General John Suthers unveiled new legislation designed to target appraisal fraud and mortgage brokers who engage in deceptive trade practice.
Colorado, after being No. 1 in the country for foreclosure rates for much of last year, is now No. 2, according to California-based RealtyTrac, which tracks homes in some stage of the foreclosure process across the country.
"Last year, thanks to the efforts of the Attorney General’s Mortgage Fraud Task Force, new consumer protections were adopted for families facing foreclosure and stiffer penalties were enacted to address mortgage fraud," Suthers said. "This year, we are taking further steps to protect homeowners."
He said the proposed new legislation, to be sponsored by Sen. Jennifer Veiga (D-Denver) and Rep. Tom Massey, (R-Chaffee), "targets the growing problems of appraisal fraud, and adds additional penalties against mortgage brokers who engage in deceptive practices."
The Division of Real Estate, under the legislation, will have the authority to deny or revoke the registration of a mortgage broker who has been prohibited by any court from engaging in deceptive conduct relating to brokerage a mortgage loans.
As of Jan. 1, mortgage brokers in the state for the first time are required to register with the state.
To address the growing wave of appraisal fraud, the legislation also prohibits a mortgage broker from "compensating, coercing or intimidating a real estate appraiser in order to obtain an artificially inflated appraisal."
The legislation prohibits anyone, including Realtors, other brokers, lenders, or investors from "improperly influencing, or attempting to influence an appraiser and the value of a residence, and prohibits an appraiser from knowingly submitting a false appraisal.
Violators can be criminally prosecuted as a Class 1 misdemeanor for a first conviction and a class 6 felony for subsequent convictions. They also can face civil liability under the Consumer Protection Act.
"This legislation is another tool we can give homeowners to combat a problem that has become much too prevalent in Colorado," Veiga said.
Massey said that "mortgage and appraisal fraud are not just urban problems. Rural areas such as my district have seen too many families lose their homes as a result of these fraudulent practices."
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