Go to the mobile version of this Web site.

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

New bill targets appraisal, mortgage fraud

Measure could put deceptive mortgage brokers out of work

John Rebchook, Rocky Mountain News

Published January 9, 2007 at midnight

Text size  

More Real Estate

More stories »

Attorney General John Suthers on Monday unveiled proposed legislation targeting appraisal and mortgage fraud that is fueling record foreclosures in the state.

"Just as homeownership is the American dream, mortgage and foreclosure fraud has become an American nightmare," Suthers said at a news conference.

Last year, a record 19,425 real estate foreclosures were filed in the seven-county Denver area, although the foreclosure rate was worse when the previous record was set in 1988.

The legislation will be sponsored by Sen. Jennifer Veiga, D-Denver, and Rep. Tom Massey, R-Chaffee, who also sponsored legislation last year requiring mortgage brokers in Colorado to register with the state.

The proposal would give the previous legislation "more teeth," Veiga said.

It gives the Division of Real Estate the authority to put mortgage brokers out of business if they have been convicted of deceptive practices and cracks down on anyone who contributes to appraisal fraud, Suthers said.

Veiga said Denver and Colorado like to be first in a number of things - but not for foreclosures and mortgage fraud, a dubious title held by the state for most of 2006.

Suthers said the new bill won't cost his office a lot more money because district attorneys could also use the new law. And because violators also could face civil penalties, private attorneys would be able to seek treble damages, which could open the door to more private lawsuits, he said.

Senate President Pro Tem Peter Groff, D-Denver, and Rep. Rosemary Marshall, D-Denver, also are studying legislation to tackle mortgage fraud and foreclosures, but they haven't yet drafted such a specific bill.

Chris Holbert, president of the Colorado Mortgage Lenders Association, praised the Veiga and Massey proposal.

"One of the best aspects (of this bill) is that it includes everyone who would be involved in real estate fraud - it's not just about mortgage brokers or loan originators, but includes real estate agents and consumers," Holbert said.

Suthers said that if the proposal becomes law, it will be an important step, but it won't end the foreclosure crisis.

"No single piece of legislation is going to address or fix every problem affecting mortgage lending in Colorado," he said.

Proposed foreclosure fraud legislation

• The Division of Real Estate 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 related to the industry.

• Prohibits mortgage brokers from compensating, coercing or intimidating a real estate appraiser to get an artificially inflated appraisal.

• Will prohibit anyone else, including Realtors, other brokers, lenders, investors or consumers, from improperly influencing an appraiser and prohibits an appraiser from knowingly submitting a false appraisal.

• Violators face a Class 1 misdemeanor for the first offense and a Class 6 felony for subsequent convictions. They also will be subject to civil liability under the Consumer Protection Act.

Source: Attorney General John Suthers

or 303-954-5207