Ritter signs foreclosure bills

Colorado to license mortgage brokers, hoping to stem crisis

John Rebchook, Rocky Mountain News

Published June 2, 2007 at midnight

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Gov. Bill Ritter signed five bills into law Friday - including one to license mortgage brokers - that supporters hope will stem the tide of record foreclosures sweeping the state.

"We're on pace to log another 37,000 foreclosures this year, which was up 30 percent from 2006, and that was up 30 percent from 2005. Those are just staggering numbers," Ritter said before signing the bills at the nonprofit Brothers Redevelopment Inc. headquarters in Edgewater.

Sen. Peter Groff, D-Denver, who sponsored several of the bills, said they are among the most important pieces of legislation in which he was involved.

Until now, Colorado and Alaska were the only states that didn't license mortgage brokers.

Alaska's legislature recently approved a bill that would license mortgage brokers and is waiting for the signature of its governor, Sarah Palin.

"In light of the recent foreclosure and mortgage fraud epidemic in Colorado, we welcome this additional authority to protect consumers," said Erin Toll, director of the Division of Real Estate.

One of the best features of the new laws, she said, is if a broker has a license revoked, he or she can't get it back until they've repaid the consumers they ripped off.

"Giving money back to the government is good. Giving money back to the victims is great," Toll said.

Some brokers were concerned the new laws, which took effect immediately, would keep them from making loans until they could comply with the new rules. In response, Toll implemented an emergency rule Friday that allows mortgage brokers to continue to do business.

Mortgage broker Jim Spray has been working to license brokers for more than a dozen years. "This is a momentous day," he said.

But some experts also questioned whether the new laws will do much to slow the number of foreclosures.

Peter Lansing, president of Universal Lending, who supports the new laws, said only a housing market recovery can end the foreclosure crisis.

"What we need are rising housing prices and more jobs," Lansing said. "Only market forces can stem the tide of foreclosures, not legislation. People lose their jobs and can't make their mortgage payments, and they can't sell their homes (for a profit) because of a flat market. Life happens."

Michael Hancock, president of the Denver City Council, however, said the laws will stop foreclosures caused by brokers who made loans to consumers they knew would likely struggle to make ends meet.

The new laws will help reduce predatory lending practices, which contributed to a large percentage of foreclosures in minority communities, said Kevin Marchman, executive director of the National Organization of African Americans in Housing. "I think this legislation will be a model for the rest of the country," Marchman said.

Foreclosure mortgage-fraud bills at a glance

HB 1322, MEASURE TO PREVENT MORTGAGE FRAUD

• Sponsor: Rep. Rosemary Marshall, D-Denver; Sen. Peter Groff, D-Denver

• Summary: Mortgage brokers and others involved in real estate transactions must act for the benefit of the borrower, including making reasonable inquiries into the borrower's financial situation and using best efforts to obtain a loan that takes into consideration the borrower's situation.

SB 85, PROTECTS CONSUMER REAL ESTATE TRANSACTIONS

• Sponsor: Rep. Jennifer Veiga, D-Denver; Rep. Tom Massey, R-Poncha Springs

• Summary: Prohibits brokers from trying to influence the judgment of a real estate appraiser through coercion, intimidation or compensation.

SB 203, MORTGAGE BROKER LICENSING

• Sponsor: Marshall and Groff

• Summary: Brokers must be licensed by the Division of Real Estate and must get adequate training, testing and continuing education and are prohibited from engaging in 24 specific activities, including fraud and conflicts of interest. A broker who has a license revoked for violating this legislation would not be eligible to be reinstated unless he or she provides full restitution to individuals he or she has harmed.

SB 216, MORTGAGE LOAN ACTS PRACTICES

• Sponsor: Veiga, Marshall

• Summary: Requires brokers to act in good faith and deal fairly, including: not to recommend the borrower enter into a transaction that "does not have a reasonable tangible net benefit to the borrower, considering his circumstances; to make reasonable inquiry into the borrower's financial circumstances; not to make loans where there is no reasonable probability of repayment."

SB 249, REAL ESTATE TITLE ESCROW SETTLEMENT

• Sponsor: Rep. Joe Rice, D-Littleton; Veiga

• Summary: The Division of Insurance is required to provide annual reports on the number of enforcement actions taken, the market trends with title insurance and real estate transactions, and consumer complaints generated by market analysis, investigation and enforcement efforts regarding title insurance.Source: Gov. Bill Ritter'S Office

rebchookj@RockyMountainNews.com or 303-954-5207

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