Mortgage broker crackdown

By John Rebchook, Rocky Mountain News (Contact)

Published March 20, 2008 at 12:05 a.m.

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Photo by Darin McGregor / The Rocky

Erin Toll, director of the Colorado Division of Real Estate, thinks the new Consumer Protection Act will help reduce the number of foreclosures and save consumers millions of dollars.

One person pleaded guilty to criminally negligent homicide.

Another committed lewd and lascivious acts in the presence of a child. Another is a burglar and thief and is being sued by the office of the attorney general for alleged violations of the Colorado Consumer Protection Act.

What they have in common was a desire to be licensed as mortgage brokers in Colorado.

These criminals were among 73 people who have had their request denied or have been disciplined by the Colorado Division of Real Estate since Gov. Bill Ritter signed a law last year licensing brokers for the first time.

The law went into effect Jan. 1.

Erin Toll, the director of the real estate division, believes the actions will help reduce the record foreclosures in the state and save consumers millions of dollars.

"What this means is that we are doing our job of protecting consumers," Toll said.

"We're left to imagine where we would be in terms of foreclosures if we didn't have so many bad actors in the mortgage business in the first place," Toll said.

"Now that we're getting bad actors off the street, it is bound to mean that foreclosures will not grow as fast as they were," she said.

Toll said her office frequently gets calls from people who were bilked in mortgage scams, who didn't even understand they were signing loans for adjustable rate mortgages in which the payments can rise.

"I do think it's fair to say we have spared millions of dollars in potential fraud," Toll said.

Toll's office has 23 pending actions against mortgage brokers, including one by a woman who met a borrower on a dating site, made him a loan and wired the money into her real boyfriend's account.

"The (victim) thought he was dating her," Toll said.

Her office also has about 150 open investigations into mortgage brokers, who could lose their licenses or be fined.

Still, the vast majority of people who have applied for licenses have received them.

As of early March, there were 9,146 licensed brokers in the state.

"We have about another 680 in the pipeline, so we are almost at 10,000," Toll said.

Zachary Urban, who runs the Colorado Foreclosure Hotline (1-877-601-HOPE) and who also sits on the real estate division's board, said the biggest benefit of the licensing can't be measured.

"What I think licensing is doing is making a much larger number of folks make the conscious effort not to even begin the process" because they know they won't meet minimum standards.

For years, Colorado and Alaska were the only states in the country that didn't regulate mortgage brokers, although both do now.

In the past, a Republican-controlled legislature killed proposed bills that would regulate or license brokers because of fears it would constrain trade, hurt small lenders and cause costs to consumers to rise.

That changed when Colorado got a Democrat-controlled legislature and a Democratic governor.

"This does provide some barriers to entry," Urban said. "But it also gives some kind of credibility to people who have met the minimum requirements to get a license."

Peter Lansing, president of Universal Lending, said he supports the licensing but cautions consumers to be careful about whom they trust to make them a loan.

"I think it is doing what we can expect it to do," Lansing said. "It does not clean out the industry completely. Consumers should not drop their guards because we now have licensing. It's no different than Realtors. They have to be licensed, but there are still some Realtors out there you wouldn't want to do business with."

Senate Bill 203, which created the Mortgage Broker Licensing Act, among other things, prohibits brokers from engaging in 24 specific activities, including misrepresentation, fraud, conflicts of interest and obligations to consumers.

It does not prohibit a convicted murderer, for example, from becoming a mortgage broker. Several of the convicted felons are challenging their denial of a license by Toll, but none of the cases has been resolved yet.

"Murder may not fit exactly as fraud, but under common law, I think if we asked the (murder) victim's family, we might find that the victim may have been lured or deceived before they were dragged into the bushes and killed," Toll said.

"It's sort of a gray area, and we've decided to err on the side of the consumer. After all, mortgage brokers often go into people's homes."

rebchookj@RockyMountainNews.com or 303-954-5207

• March 20, 2008

  8:18 a.m.

  Suggest removal

  Marshdale writes:

  It's about time. I know several brokers who simply abandoned the industry because there were to many shadey dealers out there. Maybe this will attract the good ones back?

• March 20, 2008

  9:03 a.m.

  Suggest removal

  kelly88 writes:

  I've read your article regarding the new mortgage broker laws by the division of real estate. I think that our government officials should follow the laws that our legislature has passed and not choose to veer from the law and make themselves a judge and jury. In some cases where licenses were denied, they were denied based on convictions that were older than five years and as high as 20 years. The law clearly states that a license should not be denied after 5 years. Essentially, Erin Toll is violating the very law she is supposed to uphold. At what point our individuals entitled to be rehabilitated and work as professionals if we have people like Erin Toll constantly denying them their rights to work under the constitution. On another subject, states that have very tough mortgage broker laws have just as many foreclosures as Colorado if not more such as Florida and California. To say that mortgage licensing has a direct correlation to foreclosures is just ludicrous.

• March 20, 2008

  10:36 a.m.

  Suggest removal

  Buckshot55 writes:

  This is probably a good thing for consumers. Now all we need are similar rules for those who want to enter into politics.

• March 20, 2008

  3:36 p.m.

  Suggest removal

  Diff writes:

  After my latest two experiences with Mortgage brokers - I now hold them in the same company as Lawyers and Used car salesmen!
  They need watching - very close and careful watching!
  After getting in a bad loan, getting an education and working very hard to find a way to get out, I was about to be taken advantage of again by predatory practices. Several things that came up at the last minute that made me get very cautious.I started asking serious questions. - They of course had "answers" that seemed like excusess - and as soon as I questioned that - they had another excuses lined up and ready to go .....
  As soon as I got upset and cried foul and talked about calling the FHA and the State - Things changed VERY quickly and almost too easily.
  All this with in 36 hours and on a Sunday, before my scheduled closing! It included a doubleing of the expected closing costs -
  
  BTW if I were telling someone were to go if they were looking for a mortgage or re-finance - I'd at least tell them it would be smart to AVOID -Universal Lending- in Denver on East Evans or anyone 'associated' with them as my brokers were.

• March 20, 2008

  5:02 p.m.

  Suggest removal

  gwats writes:

  Licensing these Brokers NOW is a a lot like re-arranging the deck chairs on the Titanic.....looks good, but the ship is STILL sinking! People need to be really educated about the Mortgage lending process and question EVERYTHING! There are still bad brokers and Lenders out there so beware!

• March 25, 2008

  10:19 p.m.

  Suggest removal

  American100 writes:

  Speaking as a Lic R.E. Broker I am applauding this law. There are too many dishonest people who are allowed to keep on working.

  It's time to bring some dignity into the R.E. & Mtg. Brokerage industry.

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