Mortgage broker law already bars 10 people

New state registration process designed to reduce scams, fraud

John Rebchook, Rocky Mountain News

Thursday, January 18, 2007

A new state law has barred 10 people from registering as mortgage brokers, a step some think will help prevent millions of dollars in scams and fraud.

Some 3,465 people have been registered under the Morgtage Brokers Registration Act, which took effect Jan. 1, said Geoffrey Hier, spokesman for the Colorado Department of Regulatory Agencies.

Another 516 applications, as of Wednesday, were waiting to have background checks completed, one of the requirements for registration.

"It is too early to tell whether it is working because it has only been in effect for 16 days," Hier said Tuesday.

"But if nothing else, we have some idea of who is out there, which we didn't before," he added. "It's a good start.

"We'll never know how many people didn't apply because they knew they wouldn't qualify."

Legislators passed the law last year after concerns continued to rise about record foreclosures, some of which can be traced to real estate scams and predatory lending.

A RealtyTrac study released Tuesday said Colorado again had the highest foreclosure rate in the country in December.

Colorado and Alaska had been the only states in the nation with no regulations regarding mortgage brokers.

Under the new state law, brokers with federally chartered lenders and FHA- and VA-approved lenders aren't required to register. The division of real estate so far has exempted 142 companies.

Those who do register must be fingerprinted, undergo criminal investigations by the FBI and the Colorado Bureau of Investigation, and post a $25,000 surety bond, which typically costs about $200.

Also, there is a $200 registration fee, so the division has raised more than $680,000, which will be used to help administer the program.

Erin Toll, head of the state's real estate division, also noted that for the first time, consumers can go to the Colorado Division of Real Estate's Web page at www.DORA.state.co.us/real-estate/ and lodge a complaint against mortgage brokers.

The division last week denied a Colorado Open Records request by the Rocky Mountain News to look at the files of the people who were rejected.

Chris Holbert, president of the Colorado Mortgage Lenders Association, said he didn't recognize any names on the list.

One of those who was denied, however, is Steven Thompson, who in 2003 was accused of bilking homeowners out of more than $1 million using sophisticated mortgage scams.

Thompson, who couldn't be reached Wednesday, in 2003 denied any wrongdoing.

Mortgage broker Jim Spray, a longtime advocate of cracking down on mortgage fraud, helped several homeowners investigate Thompson in 2003.

"If the others were denied for similar reasons as those which caused denial of Mr. Thompson, Colorado mortgage consumers should feel very relieved this new law is working as intended," Spray said. "This seems to be getting rid of the worst of the worse mortgage brokers in the state.

"If someone can't afford $200 to get a bond, they need to get out of the mortgage business and go work at a car wash," added Spray, a broker with America's Mortgage in Wheat Ridge. "I have seen a million dollars disappear in mortgage fraud in a week."

Rejected mortgage brokers

* Rejections are based on either a conviction or a loss of a professional license, such as a real estate license, on such charges as fraud, theft, deceit, material misrepresentations, or breach of a fiduciary duty.

Source: Colorado Division of Real Estate

Complaint

To file an online complaint against a mortgage broker go to www.DORA.state.co.us/real-estate/

rebchookj@RockyMountainNews.com or 303-954-5207