Tough words on mortgage fraud

State's real estate leader says scofflaws are being ratted out

John Rebchook, Rocky Mountain News

Published September 15, 2007 at midnight

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Home buyers and owners refinancing mortgages are increasingly finding at the closings that their lender isn't honoring the deal they thought they had locked up.

Throw in the record levels of foreclosures.

Colorado's General Assembly this year passed 60 pages of laws regarding mortgage regulations, going from the least-regulated state in the country to one that is being used as a model nationwide.

As many as 100,000 people in the lending industry nationwide have lost their jobs in recent weeks because of the meltdown in the subprime market.

In the midst of all this, several hundred mortgage brokers attended the Colorado Association of Mortgage Brokers annual conference, which ended Friday in downtown Denver.

"I think we had slightly fewer people attending this year than last year because of the shakeout in our industry," said Bill Kidwell, president of the group.

On the other hand, he said that the new laws, which will require mortgage brokers to be licensed next year, were a big draw.

He said that one of the highlights was a speech Friday by Erin Toll, the head of the Colorado of Division of Real Estate. Kidwell said his group will present suggestions to Toll for more stringent requirements, such as comprehensive tests for brokers.

Toll answered questions from brokers about how the new laws will work and how to meet the requirements it places on brokers, such as reporting the amount of their commissions.

She said she is learning about most of the violations of the laws from competitors.

"You're ratting each other out," Toll said. "I love it."

For example, she said she is shutting down one Denver Tech Center area mortgage broker who hired 15 brokers and told each of them they didn't have to register with the state, even though they must.

She also said she plans to pursue aggressively mortgage companies engaged in false advertising and other forms of consumer fraud.

Toll said that problems in the mortgage industry are coming from Wall Street and not from her office or from the new laws.

"I'm not the boogeyman," she said. "I don't sleep hanging upside down at night. I don't have a coffin in a cave where I go to rejuvenate myself."

What they're saying

The Rocky Mountain News on Friday asked some mortgage brokers attending the annual meeting of the Colorado Association of Mortgage Brokers what it will take and how long it will take to turn around their industry.

Megan McDonald, Consumer Financial Services in Centennial

• Quote: "There are some schools of thought it could take six months; others say 24 months. We just don't know. We're experiencing very fear-based lenders. People fear losing their jobs. It would absolutely help if the Fed would lower rates. Consumers might begin to relax a little bit."

Karen Wright, owner of J&K Mortgage Consulting in Denver

• Quote: "That is a tough question. I'm hoping things are going to change in mid-2008. I think the government is going to have to step in. There are so many foreclosures that if a homeowner gets behind on three months of their payment, it seems like there is nothing they can do to keep out of foreclosure."

rebchookj@RockyMountainNews.com or 303-954-5207

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