An * in the left margin indicates a change in the statute, rule, or text since the last publication of the manual.

I. Introduction In 2003, the Department of Regulatory Agencies received a request to initiate a review of the mortgage loan origination industry to determine whether regulation was appropriate. Accordingly, pursuant to § 24-34-104.1(2), C.R.S., a sunrise review was conducted and completed October 14, 2005. In summary, the review addressed Colorado’s current regulatory environment with respect to mortgage transactions and the possibility for public harm. Colorado was one of two states (the other being Alaska) that had no regulatory oversight of mortgage loan originators. The sunrise review also concluded that there was significant risk to consumers, as mortgage financing often represented their largest financial transaction. The review highlighted an inherent conflict of interest between the consumer, who seeks the lowest possible interest rate, and the mortgage loan originator, who receives compensation from higher interest rates. Ultimately, the sunrise review identified a need for regulatory oversight to ensure consumer protection. As a result, the Mortgage Broker Registration Act, House Bill 06-1161, was passed by the Colorado General Assembly in 2006. The Mortgage Broker Registration Act provided a minimal registration program for mortgage loan originators. Registration required a completed criminal background check, a $25,000 surety bond, a completed application, and payment of the $200 application fee. Due to the wave of foreclosures and the mortgage fraud epidemic, the Colorado General Assembly passed four new mortgage broker bills in the 2007 session. These included House Bill 07-1322, Senate Bill 07-085, Senate Bill 07-216, and Senate Bill 07-203. Governor Bill Ritter, Jr. signed all four bills into law on June 1, 2007. This legislation created a significant change in Colorado’s regulatory environment. House Bill 07-1322 contained measures to prevent mortgage fraud and established comprehensive definitions of prohibited conduct for mortgage loan originators. Senate Bill 07-085 prohibited mortgage loan originators from coercing or intimidating appraisers for the purpose of influencing an appraiser’s independent judgment. Senate Bill 07-216 established that mortgage loan originators have a duty of good faith and fair dealing in all communications and transactions with a borrower. Finally, Senate Bill 07-203 required the development of a licensure program and the establishment of grounds for disciplinary actions. In July of 2008, Congress passed the Housing and Economic Recovery Act of 2008. A small portion of this Act is Title V – The S.A.F.E. Mortgage Licensing Act, which may also be cited as the Secure and Fair Enforcement for Mortgage Licensing Act of 2008. In summary, this bill sets minimum national licensing standards for mortgage loan originators and requires that all mortgage loan originators be registered on the Nationwide Mortgage Licensing System and Registry. Additionally, this law requires licensure for a few new groups of individuals and loan originators , including: loan originators working for non-profit organizations; loan originators working in chattel financing related to mobile and manufactured housing; loan originators working for affiliates of depositories; and 13-1

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independent contractor loan processors and underwriters. The S.A.F.E. Act was essentially a mandate for states to ensure that their laws are consistent with this federal mandate. Furthermore, the S.A.F.E. Act mandates the development of the Nationwide Mortgage Licensing System and Registry. This registry will benefit Colorado, because it will be possible to track individuals across state lines. In order to adopt provisions defined in the S.A.F.E. Act, the Colorado General Assembly passed House Bill 09-1085 in May of 2009 ; it became effective August 5, 2009. In 2009, the Federal Housing and Finance Agency established a policy decision requiring Fannie Mae and Freddie Mac to only purchase mortgage loans if they contained a unique identifier for the individual mortgage loan originator and the mortgage company. Because Colorado, at that time, was one of two states (the other being Hawaii) that did not have any oversight regarding mortgage companies, the Colorado General Assembly acted and passed House Bill 10-1141. This law became effective on August 11, 2010 and requires mortgage companies to be registered on the Nationwide Mortgage Licensing System and Registry. Furthermore, this law established some standards of conduct for mortgage companies, including: document retention; advertising standards; and a prohibition on mortgage companies hiring unlicensed mortgage loan originators. Additionally, this law transforms the Mortgage Loan Originator Program from a director-model program to a board-model program. The defined board consists of five members, three of which are to be licensed mortgage loan originators and two that are representatives of the public at large. The transition to the new Board of Mortgage Loan Originators is an important change for Colorado’s Mortgage Loan Originator regulatory program. Since the inception of the mortgage regulatory program, there have been seven laws that have been passed. Additionally, there have been close to 40 rules that have been promulgated, many of which were adopted on an emergency basis. This regulatory program has seen a consistent change in licensing requirements, standards of conduct, and prohibitions. The mission of the Department of Regulatory Agencies is consumer protection. The Colorado Division of Real Estate now has the tools to protect Colorado consumers and ensure fair competition through aggressive enforcement and responsible implementation.

II. Mortgage Loan Originator Licensing and Mortgage Company Registration Act Colorado Revised Statutes Title 12, Article 61, Part 9 § 12-61-901, C.R.S. Short title. This part 9 shall be known and may be cited as the “Mortgage Loan Originator Licensing and Mortgage Company Registration Act”.

§ 12-61-902, C.R.S. Definitions. As used in this part 9, unless the context otherwise requires: (1) “Affiliate” means a person who, directly or indirectly, through intermediaries controls, is controlled by, or is under the common control of another person addressed by this part 9. (1.2) “Affordable housing dwelling unit” means an affordable housing dwelling unit as defined in section 29-26-102, C.R.S. (1.3) “Board” means the board of mortgage loan originators created in section 12-61-902.5. 13-2

Chapter 13: Mortgage Loan Originators (1.5) “Borrower” means any person who consults with or retains a mortgage loan originator in an effort to obtain or seek advice or information on obtaining or applying to obtain a residential mortgage loan for himself, herself, or persons including himself or herself, regardless of whether the person actually obtains such a loan. (1.7) “Community development organization” means any community housing development organization or community land trust as defined by the federal “Cranston-Gonzalez National Affordable Housing Act of 1990” or a community-based development organization as defined by the federal “Housing and Community Development Act of 1974”, that is also either a private or public nonprofit organization that is exempt from taxation under section 501 (a) of the federal “Internal Revenue Code of 1986” pursuant to section 501 (c) of the federal “Internal Revenue Code of 1986”, 26 U.S.C. sec. 501 (a) and 501 (c), and that receives funding from the United States department of housing and urban development, Colorado division of housing, Colorado housing and finance authority, or United States department of agriculture rural development, or through a grantee of the United States department of housing and urban development, purely for the purpose of community housing development activities. (2) “Depository institution” has the same meaning as set forth in the “Federal Deposit Insurance Act”, 12 U.S.C. sec. 1813 (c), and includes a credit union. (3) “Director” means the director of the division of real estate. (4) “Division” means the division of real estate. (4.3) “Dwelling” shall have the same meaning as set forth in the federal “Truth in Lending Act”, 15 U.S.C. sec. 1602 (v). (4.5) “Federal banking agency” means the board of governors of the federal reserve system, the comptroller of the currency, the director of the office of thrift supervision, the national credit union administration, or the federal deposit insurance corporation. (4.6) “HUD-approved housing counseling agency” means an agency that is either a private or public nonprofit organization that is exempt from taxation under section 501 (a) of the federal “Internal Revenue Code of 1986” pursuant to section 501 (c) of the federal “Internal Revenue Code of 1986”, 26 U.S.C. sec. 501 (a) and 501 (c), and approved by the United States department of housing and urban development, in accordance with the housing counseling program handbook section 7610.1 and 24 CFR 214. (4.7) “Individual” means a natural person. (4.9) (a) “Loan processor or underwriter” means an individual who performs clerical or support duties at the direction of, and subject to supervision by, a state-licensed loan originator or a registered loan originator. (b) As used in this subsection (4.9), “clerical or support duties” includes duties performed after receipt of an application for a residential mortgage loan, including: (I) The receipt, collection, distribution, and analysis of information commonly used for the processing or underwriting of a residential mortgage loan; and (II) Communicating with a borrower to obtain the information necessary to process or underwrite a loan, to the extent that the communication does not include offering or negotiating loan rates or terms or counseling consumers about residential mortgage loan rates or terms. (5) “Mortgage company” means a person other than an individual who, through employees or other individuals, takes residential loan applications or offers or negotiates terms of a residential mortgage loan. (5.5) “Mortgage lender” means a lender who is in the business of making residential mortgage loans if: (a) The lender is the payee on the promissory note evidencing the loan; and 13-3

Colorado Real Estate Manual (b)

(6)

(6.3)

(6.5) (7) (7.5) (7.6)

(7.7)

The loan proceeds are obtained by the lender from its own funds or from a line of credit made available to the lender from a bank or other entity that regularly loans money to lenders for the purpose of funding mortgage loans. (a) “Mortgage loan originator” means an individual who: (I) Takes a residential mortgage loan application; or (II) Offers or negotiates terms of a residential mortgage loan. (b) “Mortgage loan originator” does not include: (I) An individual engaged solely as a loan processor or underwriter; (II) A person that only performs real estate brokerage or sales activities and is licensed or registered pursuant to part 1 of this article, unless the person is compensated by a mortgage lender or a mortgage loan originator; (III) A person solely involved in extensions of credit relating to time share plans, as defined in 11 U.S.C. sec. 101 (53D); (IV) An individual who is servicing a mortgage loan; or (V) A person that only performs the services and activities of a dealer, as defined in section 24-32-3302, C.R.S. “Nationwide mortgage licensing system and registry” means a mortgage licensing system developed pursuant to the federal “Secure and Fair Enforcement for Mortgage Licensing Act of 2008”, 12 U.S.C. sec. 5101 et seq., to track the licensing and registration of mortgage loan originators and that is established and maintained by: (a) The conference of state bank supervisors and the American association of residential mortgage regulators, or their successor entities; or (b) The secretary of the United States department of housing and urban development. “Nontraditional mortgage product” means a mortgage product other than a thirty-year, fixedrate mortgage. “Originate a mortgage” means to act, directly or indirectly, as a mortgage loan originator. “Person” means a natural person, corporation, company, limited liability company, partnership, firm, association, or other legal entity. “Quasi-government agency” means an agency that is either a private or public nonprofit organization that is exempt from taxation under section 501 (a) of the federal “Internal Revenue Code of 1986” pursuant to section 501 (c) of the federal “Internal Revenue Code of 1986”, 26 U.S.C. sec. 501 (a) and 501 (c), and was created to operate in accordance with article 4 of title 29, C.R.S., as a public housing authority. “Real estate brokerage activity” means an activity that involves offering or providing real estate brokerage services to the public, including, without limitation: (a) Acting as a real estate agent or real estate broker for a buyer, seller, lessor, or lessee of real property; (b) Bringing together parties interested in the sale, purchase, lease, rental, or exchange of real property; (c) Negotiating, on behalf of any party, any portion of a contract relating to the sale, purchase, lease, rental, or exchange of real property, other than matters related to financing for the transaction; (d) Engaging in an activity for which a person engaged in the activity is required under applicable law to be registered or licensed as a real estate agent or real estate broker; or (e) Offering to engage in any activity, or act in any capacity related to such activity, described in this subsection (7.7). 13-4

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(9) (9.5)

(10)

(11)

(12)

“Residential mortgage loan” means a loan that is primarily for personal, family, or household use and that is secured by a mortgage, deed of trust, or other equivalent, consensual security interest on a dwelling or residential real estate upon which is constructed or intended to be constructed a single-family dwelling or multiple-family dwelling of four or fewer units. “Residential real estate” means any real property upon which a dwelling is or will be constructed. “Self-help housing organization” means a private or public nonprofit organization that is exempt from taxation under section 501 (a) of the federal “Internal Revenue Code of 1986” pursuant to section 501 (c) of the federal “Internal Revenue Code of 1986”, 26 U.S.C. sec. 501 (a) and 501 (c), and that purely originates residential mortgage loans with interest rates no greater than zero percent for borrowers who have provided part of the labor to construct the dwelling securing the loan or that receives funding from the United States department of agriculture rural development section 502 mutual self-help housing program for borrowers that have provided part of the labor to construct the dwelling securing the loan. “Servicing a mortgage loan” means collecting, receiving, or obtaining the right to collect or receive payments on behalf of a mortgage lender, including payments of principal, interest, escrow amounts, and other amounts due on obligations due and owing to the mortgage lender. “State-licensed loan originator” means an individual who is: (a) A mortgage loan originator or engages in the activities of a mortgage loan originator; (b) Not an employee of a depository institution or a subsidiary that is: (I) Owned and controlled by a depository institution; and (II) Regulated by a federal banking agency; (c) Licensed or required to be licensed pursuant to this part 9; and (d) Registered as a state-licensed loan originator with, and maintains a unique identifier through, the nationwide mortgage licensing system and registry. “Unique identifier” means a number or other identifier assigned to a mortgage loan originator pursuant to protocols established by the nationwide mortgage licensing system and registry.

§ 12-61-902.5, C.R.S. Board of mortgage loan originators – creation – compensation – enforcement of part after board creation – immunity. (1)

(2)

There is hereby created in the division a board of mortgage loan originators, consisting of five members appointed by the governor with the consent of the senate. Of the members, three shall be licensed mortgage loan originators and two shall be members of the public at large not engaged in mortgage loan origination or mortgage lending. Of the members of the board appointed for terms beginning on and after August 11, 2010, two of the members appointed as mortgage loan originators and one of the members appointed as a member of the public at large shall be appointed for terms of two years, and one of the members appointed as a mortgage loan originator and one of the members appointed as a member of the public at large shall serve for terms of four years. Thereafter, members of the board shall hold office for a term of four years. In the event of a vacancy by death, resignation, removal, or otherwise, the governor shall appoint a member to fill the unexpired term. The governor shall have the authority to remove any member for misconduct, neglect of duty, or incompetence. (a) The board shall exercise its powers and perform its duties and functions under the department of regulatory agencies as if transferred to the department by a type 1 transfer, as such transfer is defined in the “Administrative Organization Act of 1968”, article 1 of title 24, C.R.S. (b) Notwithstanding any other provision of this part 9, on and after the creation of the board by this section, the board shall exercise all of the rule-making, enforcement, and 13-5

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(3)

(4)

(5)

(6)

administrative authority of the director set forth in this part 9. The board has the authority to delegate to the director any enforcement and administrative authority under this part 9 that the board deems necessary and appropriate. If the board delegates any enforcement or administrative authority under this part 9 to the director, the director shall only be entitled to exercise such authority as specifically delegated in writing to the director by the board. Each member of the board shall receive the same compensation and reimbursement of expenses as those provided for members of boards and commissions in the division of professions and occupations pursuant to section 24-34-102 (13), C.R.S. Payment for all per diem compensation and expenses shall be made out of annual appropriations from the mortgage loan originator licensing cash fund created in section 12-61-908. Members of the board, consultants, and expert witnesses shall be immune from suit in any civil action based upon any disciplinary proceedings or other official acts they performed in good faith pursuant to this part 9. A majority of the board shall constitute a quorum for the transaction of all business, and actions of the board shall require a vote of a majority of the members present in favor of the action taken. (a) All rules promulgated by the director prior to August 11, 2010, shall remain in full force and effect until repealed or modified by the board. The board shall have the authority to enforce any previously promulgated rules of the director under this part 9 and any rules promulgated by the board. (b) Nothing in this section shall affect any action taken by the director prior to August 11, 2010. No person who, on or before August 11, 2010, holds a license issued under this part 9 shall be required to secure an additional license under this part 9, but shall otherwise be subject to all the provisions of this part 9. A license previously issued shall, for all purposes, be considered a license issued by the board under this part 9.

§ 12-61-903, C.R.S. License required – rules. (1)

*

(a)

Unless licensed by the board and registered with the nationwide mortgage licensing system and registry as a state-licensed loan originator, an individual shall not originate or offer to originate a mortgage or act or offer to act as a mortgage loan originator. (b) On and after January 1, 2010, a licensed mortgage loan originator shall apply for license renewal in accordance with subsection (4) of this section every calendar year as determined by the board by rule. (c) (Deleted by amendment, L. 2009, (HB 09-1085), ch. 303, p. 1615, § 1, effective August 5, 2009.) (1.5) An independent contractor may not engage in residential mortgage loan origination activities as a loan processor or underwriter unless the independent contractor is a state-licensed loan originator. (2) An applicant for initial licensing as a mortgage loan originator shall submit to the board the following: (a) A criminal history record check in compliance with subsection (5) of this section; (b) A disclosure of all administrative discipline taken against the applicant concerning the categories listed in section 12-61-905 (1) (c); and (c) The application fee established by the board in accordance with section 12-61-908. (3) (a) In addition to the requirements imposed by subsection (2) of this section, on or after August 5, 2009, each individual applicant for initial licensing as a mortgage loan originator must have satisfactorily completed a mortgage lending fundamentals course approved by the board and consisting of at least nine hours of instruction in subjects 13-6

Chapter 13: Mortgage Loan Originators related to mortgage lending. In addition, the applicant must have satisfactorily completed a written examination approved by the board. For the portion of the examination that represents the state-specific test required in the federal “Secure and Fair Enforcement for Mortgage Licensing Act of 2008”, 12 U.S.C. sec. 5101 et seq., the board may adopt the uniform state test administered through the nationwide mortgage licensing system or its successor. (b) The board may contract with one or more independent testing services to develop, administer, and grade the examinations required by paragraph (a) of this subsection (3) and to maintain and administer licensee records. The contract may allow the testing service to recover from applicants its costs incurred in connection with these functions. The board may contract separately for these functions and may allow the costs to be collected by a single contractor for distribution to other contractors. (c) The board may publish reports summarizing statistical information prepared by the nationwide mortgage licensing system and registry relating to mortgage loan originator examinations. (4) An applicant for license renewal shall submit to the board the following: (a) A disclosure of all administrative discipline taken against the applicant concerning the categories listed in section 12-61-905 (1) (c); and (b) The renewal fee established by the board in accordance with section 12-61-908. (5) (a) Prior to submitting an application for a license, an applicant shall submit a set of fingerprints to the Colorado bureau of investigation. Upon receipt of the applicant’s fingerprints, the Colorado bureau of investigation shall use the fingerprints to conduct a state and national criminal history record check using records of the Colorado bureau of investigation and the federal bureau of investigation. All costs arising from such criminal history record check shall be borne by the applicant and shall be paid when the set of fingerprints is submitted. Upon completion of the criminal history record check, the bureau shall forward the results to the board. The board may acquire a name-based criminal history record check for an applicant who has twice submitted to a fingerprintbased criminal history record check and whose fingerprints are unclassifiable. (b) If the board determines that the criminal background check provided by the nationwide mortgage licensing system and registry is a sufficient method of screening license applicants to protect Colorado consumers, the board may, by rule, authorize the use of that criminal background check instead of the criminal history record check otherwise required by this subsection (5). (5.5) (a) On and after January 1, 2010, in connection with an application for a license as a mortgage loan originator, the applicant shall furnish information concerning the applicant’s identity to the nationwide mortgage licensing system and registry. The applicant shall furnish, at a minimum, the following: (I) Fingerprints for submission to the federal bureau of investigation and any government agency or entity authorized to receive fingerprints for a state, national, or international criminal history record check; and (II) Personal history and experience, in a form prescribed by the nationwide mortgage licensing system and registry, including submission of authorization for the nationwide mortgage licensing system and registry to obtain: (A) An independent credit report from the consumer reporting agency described in the federal “Fair Credit Reporting Act”, 15 U.S.C. sec. 1681a (p); and (B) Information related to any administrative, civil, or criminal findings by a government jurisdiction.

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(5.7) (6) (7)

(8)

(9)

(10)

(11)

(12)

An applicant is responsible for paying all costs arising from a criminal history record check and shall pay such costs upon submission of fingerprints. (c) The board may acquire a name-based criminal history record check for an applicant who has twice submitted to a fingerprint-based criminal history record check and whose fingerprints are unclassifiable. Repealed. Before granting a license to an applicant, the board shall require the applicant to post a bond as required by section 12-61-907. The board shall issue or deny a license within sixty days after: (a) The applicant has submitted the requisite information to the board and the nationwide mortgage licensing system and registry, including, but not limited to, the completed application, the application fee, and proof that the applicant has posted a surety bond and obtained errors and omissions insurance; and (b) The board receives the completed criminal history record check and all other relevant information or documents necessary to reasonably ascertain facts underlying the applicant’s criminal history. (a) The board may require, as a condition of license renewal on or after January 1, 2009, continuing education of licensees for the purpose of enhancing the professional competence and professional responsibility of all licensees. (b) Continuing professional education requirements shall be determined by the board by rule; except that licensees shall be required to complete at least eight credit hours of continuing education each year. The board may contract with one or more independent service providers to develop, review, or approve continuing education courses. The contract may allow the independent service provider to recover from licensees its costs incurred in connection with these functions. The board may contract separately for these functions and may allow the costs to be collected by a single contractor for distribution to other contractors. (a) The board may require contractors and prospective contractors for services under subsections (3) and (8) of this section to submit, for the board’s review and approval, information regarding the contents and materials of proposed courses and other documentation reasonably necessary to further the purposes of this section. (b) The board may set fees for the initial and continuing review of courses for which credit hours will be granted. The initial filing fee for review of materials shall not exceed five hundred dollars, and the fee for continued review shall not exceed two hundred fifty dollars per year per course offered. The board may adopt reasonable rules to implement this section. The board may adopt rules necessary to implement provisions required in the federal “Secure and Fair Enforcement for Mortgage Licensing Act of 2008”, 12 U.S.C. sec. 5101 et seq., and for participation in the nationwide mortgage licensing system and registry. In order to fulfill the purposes of this part 9, the board may establish relationships or contracts with the nationwide mortgage licensing system and registry or other entities designated by the nationwide mortgage licensing system and registry to collect and maintain records and process transaction fees or other fees related to licensees or other persons subject to this part 9. The board may use the nationwide mortgage licensing system and registry as a channeling agent for requesting information from or distributing information to the department of justice, a government agency, or any other source.

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§ 12-61-903.1, C.R.S. Registration required – rules. (1)

On or after January 1, 2011, each mortgage company shall register with the nationwide mortgage licensing system and registry, unless exempted by rule by the board, and shall renew such registration each calendar year based on the following criteria: (a) (I) The mortgage company is legally operating in the state of Colorado in accordance with standards determined and administered by the Colorado secretary of state; and (II) The mortgage company is not legally barred from operating in Colorado. (b) Sole proprietors, general partnerships, and other mortgage companies not otherwise required to register with the secretary of state shall register using a trade name.

§ 12-61-903.3, C.R.S. License or registration inactivation. (1)

The board may inactivate a state license or a registration with the nationwide mortgage licensing system and registry when a licensee has failed to: (a) Comply with the surety bond requirements of sections 12-61-903 (6) and 12-61-907; (b) Comply with the errors and omissions insurance requirement in section 12-61-903.5 or any rule of the board that directly or indirectly addresses errors and omissions insurance requirements; (c) Maintain current contact information, surety bond information, or errors and omissions insurance in for m at ion as r equ ir ed by t h is par t 9 or by a n y r u le of t h e boa r d t h a t dir ect ly or indir ect ly a ddr esses such r equ ir em en t s; (d) Respond to an investigation or examination; (e) Comply with any of the education or testing requirements set forth in this part 9 or in any rule of the board that directly or indirectly addresses education or testing requirements; or (f) Register with and provide all required information to the nationwide mortgage licensing system and registry.

§ 12-61-903.5, C.R.S. Errors and omissions insurance – duties of the board – certificate of coverage – when required – group plan made available – effect – rules. (1)

(2)

(3)

Every licensee under this part 9, except an inactive mortgage loan originator or an attorney licensee who maintains a policy of professional malpractice insurance that provides coverage for errors and omissions insurance for their activities as a licensee under this part 9, shall maintain errors and omissions insurance to cover all activities contemplated under this part 9. The division shall make the errors and omissions insurance available to all licensees by contracting with an insurer for a group policy after a competitive bid process in accordance with article 103 of title 24, C.R.S. A group policy obtained by the division must be available to all licensees with no right on the part of the insurer to cancel a licensee. A licensee may obtain errors and omissions insurance independently if the coverage complies with the minimum requirements established by the division. (a) If the division is unable to obtain errors and omissions insurance coverage to insure all licensees who choose to participate in the group program at a reasonable annual premium, as determined by the division, a licensee shall independently obtain the errors and omissions insurance required by this section. (b) The division shall solicit and consider information and comments from interested persons when determining the reasonableness of annual premiums. The division shall determine the terms and conditions of coverage required under this section based on rules promulgated by the board. Each licensee shall be notified of the required terms and conditions at least thirty days before the annual premium renewal date as determined by the 13-9

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(4)

division. Each licensee shall file a certificate of coverage showing compliance with the required terms and conditions with the division by the annual premium renewal date, as determined by the division. In addition to all other powers and duties conferred upon the board by this part 9, the board shall adopt such rules as it deems necessary or proper to carry out this section.

§ 12-61-903.7, C.R.S. License renewal. (1)

(2)

In order for a licensed mortgage loan originator to renew a license issued pursuant to this part 9, the mortgage loan originator shall: (a) Continue to meet the minimum standards for issuance of a license pursuant to this part 9; (b) Satisfy the annual continuing education requirements set forth in section 12-61-903 (8) and in rules adopted by the board; and (c) Pay applicable license renewal fees. If a licensed mortgage loan originator fails to satisfy the requirements of subsection (1) of this section for license renewal, the mortgage loan originator’s license shall expire. The board shall adopt rules to establish procedures for the reinstatement of an expired license consistent with the standards established by the nationwide mortgage licensing system and registry.

§ 12-61-904, C.R.S. Exemptions – rules. *

* *

*

(1)

Except as otherwise provided in section 12-61-905.5, this part 9 does not apply to the following, unless otherwise determined by the federal bureau of consumer financial protection or the United States department of housing and urban development: (a) (Deleted by amendment, L. 2010, (HB 10-1141), ch. 280, p. 1289, § 10, effective August 11, 2010.) (b) With respect to a residential mortgage loan: (I) A person, estate, or trust that provides mortgage financing for the sale of no more than three properties in any twelve-month period to purchasers of such properties, each of which is owned by such person, estate, or trust and serves as security for the loan; or (II) A parent who acts as a loan originator in providing loan financing to his or her child. (c) A bank and a savings association as these terms are defined in the “Federal Deposit Insurance Act”, a subsidiary that is owned and controlled by a bank or savings association, employees of a bank or savings association, employees of a subsidiary that is owned and controlled by a bank or savings association, credit unions, and employees of credit unions; (d) An attorney who renders services in the course of practice, who is licensed in Colorado, and who is not primarily engaged in the business of negotiating residential mortgage loans; (e) (Deleted by amendment, L. 2007, p. 1716, § 2, effective June 1, 2007, and p. 1734, § 6, effective January 1, 2008.) (f) A person who: (I) Funds a residential mortgage loan that has been originated and processed by a licensed person or by an exempt person; (II) Does not solicit borrowers in Colorado for the purpose of making residential mortgage loans; and

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(2) (3)

(III) Does not participate in the negotiation of residential mortgage loans with the borrower, except for setting the terms under which a person may buy or fund a residential mortgage loan originated by a licensed or exempt person; (g) A loan processor or underwriter who is not an independent contractor and who does not represent to the public that the individual can or will perform any activities of a mortgage loan originator. As used in this paragraph (g), “represent to the public” means communicating, through advertising or other means of communicating or providing information, including the use of business cards, stationery, brochures, signs, rate lists, or other promotional items, that the individual is able to provide a particular service or activity for a consumer. (h) To the extent that it is providing programs benefitting affordable housing dwelling units, an agency of the federal government, the Colorado government, or any of Colorado’s political subdivisions or employees of an agency of the federal government, of the Colorado government, or of any of Colorado’s political subdivisions; (i) Quasi-government agencies, HUD-approved housing counseling agencies, or employees of quasi-government agencies or HUD-approved housing counseling agencies; (j) Community development organizations or employees of community development organizations; (k) Self-help housing organizations or employees of self-help housing organizations or volunteers acting as an agent of self-help housing organizations. (l ) A person licensed under part 1 of this article who represents a person, estate, or trust providing mortgage financing under paragraph (b) of this subsection (1). The exemptions in subsection (1) of this section shall not apply to persons acting beyond the scope of such exemptions. The board may adopt reasonable rules modifying the exemptions in this section in accordance with rules adopted by the federal bureau of consumer financial protection or the United States department of housing and urban development.

§ 12-61-904.5, C.R.S. Originator’s relationship to borrower – rules. (1)

(2) (3)

A mortgage loan originator shall have a duty of good faith and fair dealing in all communications and transactions with a borrower. Such duty includes, but is not limited to: (a) The duty to not recommend or induce the borrower to enter into a transaction that does not have a reasonable, tangible net benefit to the borrower, considering all of the circumstances, including the terms of a loan, the cost of a loan, and the borrower’s circumstances; (b) The duty to make a reasonable inquiry concerning the borrower’s current and prospective income, existing debts and other obligations, and any other relevant information and, after making such inquiry, to make his or her best efforts to recommend, broker, or originate a residential mortgage loan that takes into consideration the information submitted by the borrower, but the mortgage loan originator shall not be deemed to violate this section if the borrower conceals or misrepresents relevant information; and (c) The duty not to commit any acts, practices, or omissions in violation of section 38-40105, C.R.S. For purposes of implementing subsection (1) of this section, the board may adopt rules defining what constitutes a reasonable, tangible net benefit to the borrower. A violation of this section constitutes a deceptive trade practice under the “Colorado Consumer Protection Act”, article 1 of title 6, C.R.S.

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§ 12-61-905, C.R.S. Powers and duties of the board. (1)

*

The board may deny an application for a license, refuse to renew, or revoke the license of an applicant or licensee who has: (a) Filed an application with the board containing material misstatements of fact or omitted any disclosure required by this part 9; (b) Within the last five years, been convicted of or pled guilty or nolo contendere to a crime involving fraud, deceit, material misrepresentation, theft, or the breach of a fiduciary duty, except as otherwise set forth in this part 9; (c) Except as otherwise set forth in this part 9, within the last five years, had a license, registration, or certification issued by Colorado or another state revoked or suspended for fraud, deceit, material misrepresentation, theft, or the breach of a fiduciary duty, and such discipline denied the person authorization to practice as: (I) A mortgage broker or a mortgage loan originator; (II) A real estate broker, as defined by section 12-61-101 (2); (III) A real estate salesperson; (IV) A real estate appraiser, as defined by section 12-61-702 (11); (V) An insurance producer, as defined by section 10-2-103 (6), C.R.S.; (VI) An attorney; (VII) A securities broker-dealer, as defined by section 11-51-201 (2), C.R.S.; (VIII) A securities sales representative, as defined by section 11-51-201 (14), C.R.S.; (IX) An investment advisor, as defined by section 11-51-201 (9.5), C.R.S.; or (X) An investment advisor representative, as defined by section 11-51-201 (9.6), C.R.S.; (d) Been enjoined within the immediately preceding five years under the laws of this or any other state or of the United States from engaging in deceptive conduct relating to the brokering of or originating a mortgage loan; (e) Been found to have violated the provisions of section 12-61-910.2; (f) Been found to have violated the provisions of section 12-61-905.5; (g) to (i) Repealed. (j) Not demonstrated financial responsibility, character, and general fitness to command the confidence of the community and to warrant a determination that the individual will operate honestly, fairly, and efficiently, consistent with the purposes of this part 9; (k) Not completed the prelicense education requirements set forth in section 12-61-903 and any applicable rules of the board; or (l ) Not passed a written examination that meets the requirements set forth in section 12-61903 and any applicable rules of the board. (1.5) The board shall deny an application for a license, refuse to renew, or revoke the license of an applicant or licensee who has: (a) (I) Had a mortgage loan originator license or similar license revoked in any jurisdiction. (II) If a revocation is subsequently formally nullified, the license is not revoked for purposes of this paragraph (a). (b) (I) At any time preceding the date of application for a license, been convicted of, or pled guilty or nolo contendere to, a felony in a domestic, foreign, or military court if the felony involved an act of fraud, dishonesty, breach of trust, or money laundering. 13-12

Chapter 13: Mortgage Loan Originators (II)

(2) (3)

(4)

(5)

(6)

(7)

If the individual obtains a pardon of the conviction, the board shall not deem the individual convicted for purposes of this paragraph (b). (c) Been convicted of, or pled guilty or nolo contendere to, a felony within the seven years immediately preceding the date of application for a license. The board may investigate the activities of a licensee or other person that present grounds for disciplinary action under this part 9 or that violate section 12-61-910 (1). (a) If the board has reasonable grounds to believe that a mortgage loan originator is no longer qualified under subsection (1) of this section, the board may summarily suspend the mortgage loan originator’s license pending a hearing to revoke the license. A summary suspension shall conform to article 4 of title 24, C.R.S. (b) The board shall suspend the license of a mortgage loan originator who fails to maintain the bond required by section 12-61-907 until the licensee complies with such section. The board or an administrative law judge appointed pursuant to part 10 of article 30 of title 24, C.R.S., shall conduct disciplinary hearings concerning mortgage loan originators and mortgage companies. Such hearings shall conform to article 4 of title 24, C.R.S. (a) Except as provided in paragraph (b) of this subsection (5), an individual whose license has been revoked shall not be eligible for licensure for two years after the effective date of the revocation. (b) If the board or an administrative law judge determines that an application contained a misstatement of fact or omitted a required disclosure due to an unintentional error, the board shall allow the applicant to correct the application. Upon receipt of the corrected and completed application, the board or administrative law judge shall not bar the applicant from being licensed on the basis of the unintentional misstatement or omission. (a) The board or an administrative law judge may administer oaths, take affirmations of witnesses, and issue subpoenas to compel the attendance of witnesses and the production of all relevant papers, books, records, documentary evidence, and materials in any hearing or investigation conducted by the board or an administrative law judge. The board may request any information relevant to the investigation, including, but not limited to, independent credit reports obtained from a consumer reporting agency described in the federal “Fair Credit Reporting Act”, 15 U.S.C. sec. 1681a (p). (b) Upon failure of a witness to comply with a subpoena or process, the district court of the county in which the subpoenaed witness resides or conducts business may issue an order requiring the witness to appear before the board or administrative law judge; produce the relevant papers, books, records, documentary evidence, testimony, or materials in question; or both. Failure to obey the order of the court may be punished as a contempt of court. The board or an administrative law judge may apply for such order. (c) The licensee or individual who, after an investigation under this part 9, is found to be in violation of a provision of this part 9 shall be responsible for paying all reasonable and necessary costs of the division arising from subpoenas or requests issued pursuant to this subsection (6), including court costs for an action brought pursuant to paragraph (b) of this subsection (6). (a) If the board has reasonable cause to believe that an individual is violating this part 9, including but not limited to section 12-61-910 (1), the board may enter an order requiring the individual to cease and desist such violations. (b) The board, upon its own motion, may, and, upon the complaint in writing of any person, shall, investigate the activities of any licensee or any individual who assumes to act in such capacity within the state. In addition to any other penalty that may be imposed pursuant to this part 9, any individual violating any provision of this part 9 or any rules

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Colorado Real Estate Manual promulgated pursuant to this article may be fined upon a finding of misconduct by the board as follows: (I) In the first administrative proceeding, a fine not in excess of one thousand dollars per act or occurrence; (II) In a second or subsequent administrative proceeding, a fine not less than one thousand dollars nor in excess of two thousand dollars per act or occurrence. (c) All fines collected pursuant to this subsection (7) shall be transferred to the state treasurer, who shall credit such moneys to the mortgage company and loan originator licensing cash fund created in section 12-61-908. (8) The board shall keep records of the individuals licensed as mortgage loan originators and of disciplinary proceedings. The records kept by the board shall be open to public inspection in a reasonable time and manner determined by the board. (9) (a) The board shall maintain a system, which may include, without limitation, a hotline or web site, that gives consumers a reasonably easy method for making complaints about a mortgage loan originator. (b) (Deleted by amendment, L. 2009, (HB 09-1085), ch. 303, p. 1621, § 1, effective August 5, 2009.) (10) The board shall promulgate rules to allow licensed mortgage loan originators to hire unlicensed mortgage loan originators under temporary licenses. If an unlicensed mortgage loan originator has initiated the application process for a license, he or she shall be assigned a temporary license for a reasonable period until a license is approved or denied. The licensed mortgage loan originator who employs an unlicensed mortgage loan originator shall be held responsible under all applicable provisions of law, including without limitation this part 9 and section 3840-105, C.R.S., for the actions of the unlicensed mortgage loan originator to whom a temporary license has been assigned under this subsection (10).

§ 12-61-905.1, C.R.S. Powers and duties of the board over mortgage companies – fines – rules. (1)

With respect to mortgage companies, the board may deny an application for registration; refuse to renew, suspend, or revoke the registration; enter cease-and-desist orders; and impose fines as set forth in this section as follows: (a) If the board has reasonable cause to believe a person is acting without a license or registration; (b) If the mortgage company fails to maintain possession, for future use or inspection by an authorized representative of the board, for a period of four years, of the documents or records prescribed by the rules of the board or to produce such documents or records upon reasonable request by the board or by an authorized representative of the board; (c) If the mortgage company employs or contracts with individuals who are required to be licensed pursuant to this part 9 and who are not either: (I) Licensed; or (II) In the process of becoming licensed; or (d) If the mortgage company directs, makes, or causes to be made, in any manner, a false or deceptive statement or representation with regard to the rates, points, or other financing terms or conditions for a residential mortgage loan, engages in bait and switch advertising as that term is used in section 6-1-105 (1) (n), C.R.S., or violates any rule of the board that directly or indirectly addresses advertising requirements.

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Chapter 13: Mortgage Loan Originators (2)

(3) (4)

(a)

The board upon its own motion or upon the complaint in writing of any person may investigate the activities of any registered mortgage company or any mortgage company that is acting in a capacity that requires registration pursuant to this part 9. (b) The board may fine a mortgage company that has violated this section or any rules promulgated pursuant to this section as follows: (I) In the first administrative proceeding, a fine not in excess of one thousand dollars per act or occurrence; (II) In a second or subsequent administrative proceeding, a fine not in excess of two thousand dollars per act or occurrence. (c) All fines collected pursuant to this section shall be transmitted to the state treasurer, who shall credit such moneys to the mortgage company and loan originator licensing cash fund created in section 12-61-908. The board may adopt reasonable rules for implementing this section. Nothing in this section automatically imputes a violation to the mortgage company if a licensed agent or employee, or an individual agent or employee who is required to be licensed, violates any other provision of this part 9.

§ 12-61-905.5, C.R.S. Disciplinary actions – grounds – procedures – rules. *

(1)

The board, upon its own motion, may, or upon the complaint in writing of any person, shall, investigate the activities of any mortgage loan originator. The board has the power to impose an administrative fine in accordance with section 12-61-905, deny a license, censure a licensee, place the licensee on probation and set the terms of probation, order restitution, order the payment of actual damages, or suspend or revoke a license when the board finds that the licensee or applicant has performed, is performing, or is attempting to perform any of the following acts: (a) Knowingly making any misrepresentation or knowingly making use of any false or misleading advertising; (b) Making any promise that influences, persuades, or induces another person to detrimentally rely on such promise when the licensee could not or did not intend to keep such promise; (c) Knowingly misrepresenting or making false promises through agents, salespersons, advertising, or otherwise; (d) Violating any provision of the “Colorado Consumer Protection Act”, article 1 of title 6, C.R.S., and, if the licensee has been assessed a civil or criminal penalty or been subject to an injunction under said act, the board shall revoke the licensee’s license; (e) Acting for more than one party in a transaction without disclosing any actual or potential conflict of interest or without disclosing to all parties any fiduciary obligation or other legal obligation of the mortgage loan originator to any party; (f) Representing or attempting to represent a mortgage loan originator other than the licensee’s principal or employer without the express knowledge and consent of that principal or employer; (g) In the case of a licensee in the employ of another mortgage loan originator, failing to place, as soon after receipt as is practicably possible, in the custody of that licensed mortgage loan originator-employer any deposit money or other money or fund entrusted to the employee by any person dealing with the employee as the representative of that licensed mortgage loan originator-employer; (h) Failing to account for or to remit, within a reasonable time, any moneys coming into his or her possession that belong to others, whether acting as a mortgage loan originator, real 13-15

Colorado Real Estate Manual estate broker, salesperson, or otherwise, and failing to keep records relative to said moneys, which records shall contain such information as may be prescribed by the rules of the board relative thereto and shall be subject to audit by the board; (i) Converting funds of others, diverting funds of others without proper authorization, commingling funds of others with the licensee’s own funds, or failing to keep such funds of others in an escrow or a trustee account with a bank or recognized depository in this state, which account may be any type of checking, demand, passbook, or statement account insured by an agency of the United States government, and to keep records relative to the deposit that contain such information as may be prescribed by the rules of the board relative thereto, which records shall be subject to audit by the board; (j) Failing to provide the parties to a residential mortgage loan transaction with such information as may be prescribed by the rules of the board; (k) Unless an employee of a duly registered mortgage company, failing to maintain possession, for future use or inspection by an authorized representative of the board, for a period of four years, of the documents or records prescribed by the rules of the board or to produce such documents or records upon reasonable request by the board or by an authorized representative of the board; (l) Paying a commission or valuable consideration for performing any of the functions of a mortgage loan originator, as described in this part 9, to any person who is not licensed under this part 9 or is not registered in compliance with the federal “Secure and Fair Enforcement for Mortgage Licensing Act of 2008”, 12 U.S.C. sec. 5101 et seq.; (m) Disregarding or violating any provision of this part 9 or any rule adopted by the board pursuant to this part 9; violating any lawful orders of the board; or aiding and abetting a violation of any rule, order of the board, or provision of this part 9; (n) Conviction of, entering a plea of guilty to, or entering a plea of nolo contendere to any crime in article 3 of title 18, C.R.S., in parts 1 to 4 of article 4 of title 18, C.R.S., in article 5 of title 18, C.R.S., in part 3 of article 8 of title 18, C.R.S., in article 15 of title 18, C.R.S., in article 17 of title 18, C.R.S., or any other like crime under Colorado law, federal law, or the laws of other states. A certified copy of the judgment of a court of competent jurisdiction of such conviction or other official record indicating that such plea was entered shall be conclusive evidence of such conviction or plea in any hearing under this part 9. (o) Violating or aiding and abetting in the violation of the Colorado or federal fair housing laws; (p) Failing to immediately notify the board in writing of a conviction, plea, or violation pursuant to paragraph (n) or (o) of this subsection (1); (q) Having demonstrated unworthiness or incompetency to act as a mortgage loan originator by conducting business in such a manner as to endanger the interest of the public; (r) (Deleted by amendment, L. 2009, (HB 09-1085), ch. 303, p. 1625, § 1, effective August 5, 2009.) (s) Procuring, or attempting to procure, a mortgage loan originator’s license or renewing, reinstating, or reactivating, or attempting to renew, reinstate, or reactivate, a mortgage loan originator’s license by fraud, misrepresentation, or deceit or by making a material misstatement of fact in an application for such license; (t) Claiming, arranging for, or taking any secret or undisclosed amount of compensation, commission, or profit or failing to reveal to the licensee’s principal or employer the full amount of such licensee’s compensation, commission, or profit in connection with any acts for which a license is required under this part 9;

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Chapter 13: Mortgage Loan Originators (u)

(v)

(w) (x)

* * *

(y) (z) (aa)

*

(bb)

*

(cc)

*

(dd)

*

(ee)

*

(ff)

Exercising an option to purchase in any agreement authorizing or employing such licensee to sell, buy, or exchange real estate for compensation or commission except when such licensee, prior to or coincident with election to exercise such option to purchase, reveals in writing to the licensee’s principal or employer the full amount of the licensee’s profit and obtains the written consent of such principal or employer approving the amount of such profit; Fraud, misrepresentation, deceit, or conversion of trust funds that results in the payment of any claim pursuant to this part 9 or that results in the entry of a civil judgment for damages; Any other conduct, whether of the same or a different character than specified in this subsection (1), that evinces a lack of good faith and fair dealing; Having had a mortgage loan originator’s license suspended or revoked in any jurisdiction or having had any disciplinary action taken against the mortgage loan originator in any other jurisdiction. A certified copy of the order of disciplinary action shall be prima facie evidence of such disciplinary action. Engaging in any unfair or deceptive practice toward any person; Obtaining property by fraud or misrepresentation; Soliciting or entering into a contract with a borrower that provides, in substance, that the mortgage loan originator may earn a fee or commission through the mortgage loan originator’s best efforts to obtain a loan even though no loan is actually obtained for the borrower; Soliciting, advertising, or entering into a contract for specific interest rates, points, or other financing terms unless the terms are actually available at the time of the solicitation, advertisement, or contract; Failing to make a disclosure to a loan applicant or a noninstitutional investor as required by section 12-61-914 and any other applicable state or federal law; Making, in any manner, any false or deceptive statement or representation with regard to the rates, points, or other financing terms or conditions for a residential mortgage loan or engaging in bait and switch advertising; Negligently making any false statement or knowingly and willfully omitting a material fact in connection with any reports filed by a mortgage loan originator or in connection with any investigation conducted by the division; In any advertising of residential mortgage loans or any other applicable mortgage loan originator activities covered by the following federal acts, failing to comply with any requirement of the “Truth in Lending Act”, 15 U.S.C. sec. 1601 and Regulation Z, 12 CFR 226 and 12 CFR 1026; the “Real Estate Settlement Procedures Act of 1974”, 12 U.S.C. sec. 2601 and Regulation X, 12 CFR 1024 et seq.; the “Equal Credit Opportunity Act”, 15 U.S.C. sec. 1691 and Regulation B, 12 CFR 202.9, 202.11, and 202.12 and 12 CFR 1002; Title V, Subtitle A of the “Financial Services Modernization Act of 1999”, also known as the “Gramm-Leach-Bliley Act”, 15 U.S.C. secs. 6801 to 6809, and the federal trade commission’s privacy rules, 16 CFR 313 and 314, mandated by the “Gramm-Leach-Bliley Act”; the “Home Mortgage Disclosure Act of 1975”, 12 U.S.C. sec. 2801 et seq. and Regulation C, home mortgage disclosure, 12 CFR 203 and 12 CFR 1003; the “Federal Trade Commission Act of 1914”, 15 U.S.C. sec. 45(a) and 16 CFR 233; and the “Telemarketing and Consumer Fraud and Abuse Prevention Act”, 15 U.S.C. secs. 6101 to 6108, and the federal trade commission’s telemarketing sales rule, 16 CFR 310, as amended. The board may adopt rules requiring mortgage loan originators to comply with other applicable state and federal statutes and regulations.

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Colorado Real Estate Manual *

*

(2) (3)

(4) (5)

(6)

(7)

(8)

(9)

(gg) Failing to pay a third-party provider, no later than thirty days after the recording of the loan closing documents or ninety days after completion of the third-party service, whichever comes first, unless otherwise agreed or unless the third-party service provider has been notified in writing that a bona fide dispute exists regarding the performance or quality of the third-party service; or (hh) Collecting, charging, attempting to collect or charge, or using or proposing any agreement purporting to collect or charge any fee prohibited by section 12-61-914 or 1261-915. (Deleted by amendment, L. 2009, (HB 09-1085), ch. 303, p. 1625, § 1, effective August 5, 2009.) Upon request of the board, when any mortgage loan originator is a party to any suit or proceeding, either civil or criminal, arising out of any transaction involving a residential mortgage loan and the mortgage loan originator participated in the transaction in his or her capacity as a licensed mortgage loan originator, the mortgage loan originator shall supply to the board a copy of the complaint, indictment, information, or other initiating pleading and the answer filed, if any, and advise the board of the disposition of the case and of the nature and amount of any judgment, verdict, finding, or sentence that may be made, entered, or imposed therein. This part 9 shall not be construed to relieve any person from civil liability or criminal prosecution under the laws of this state. Complaints of record in the office of the board and board investigations, including board investigative files, are closed to public inspection. Stipulations and final agency orders are public record and subject to sections 24-72-203 and 24-72-204, C.R.S. When a complaint or an investigation discloses an instance of misconduct that, in the opinion of the board, does not warrant formal action by the board but that should not be dismissed as being without merit, the board may send a letter of admonition by certified mail, return receipt requested, to the licensee against whom a complaint was made and a copy of the letter of admonition to the person making the complaint, but the letter shall advise the licensee that the licensee has the right to request in writing, within twenty days after proven receipt, that formal disciplinary proceedings be initiated to adjudicate the propriety of the conduct upon which the letter of admonition is based. If such request is timely made, the letter of admonition shall be deemed vacated, and the matter shall be processed by means of formal disciplinary proceedings. All administrative fines collected pursuant to this section shall be transmitted to the state treasurer, who shall credit the same to the mortgage company and loan originator licensing cash fund created in section 12-61-908. (a) The board shall not consider an application for licensure from an individual whose license has been revoked until two years after the date of revocation. (b) If an individual’s license was suspended or revoked due to conduct that resulted in financial loss to another person, no new license shall be granted, nor shall a suspended license be reinstated, until full restitution has been made to the person suffering such financial loss. The amount of restitution shall include interest, reasonable attorney fees, and costs of any suit or other proceeding undertaken in an effort to recover the loss. When the board or the division becomes aware of facts or circumstances that fall within the jurisdiction of a criminal justice or other law enforcement authority upon investigation of the activities of a licensee, the board or division shall, in addition to the exercise of its authority under this part 9, refer and transmit such information, which may include originals or copies of documents and materials, to one or more criminal justice or other law enforcement authorities for investigation and prosecution as authorized by law. 13-18

Chapter 13: Mortgage Loan Originators

§ 12-61-905.6, C.R.S. Hearing – administrative law judge – review – rules. (1)

(2)

(3)

(4)

(5)

(6)

Except as otherwise provided in this section, all proceedings before the board with respect to disciplinary actions and denial of licensure under this part 9, at the discretion of the board, may be conducted by an authorized representative of the board or an administrative law judge pursuant to sections 24-4-104 and 24-4-105, C.R.S. Proceedings shall be held in the county where the board has its office or in such other place as the board may designate. If the licensee is employed by another licensed mortgage loan originator or by a real estate broker, the board shall also notify the licensee’s employer by mailing, by first-class mail, a copy of the written notice required under section 24-4-104 (3), C.R.S., to the employer’s last-known business address. The board, an authorized representative of the board, or an administrative law judge shall conduct all hearings for denying, suspending, or revoking a license or certificate on behalf of the board, subject to appropriations made to the department of personnel. Each administrative law judge shall be appointed pursuant to part 10 of article 30 of title 24, C.R.S. The administrative law judge shall conduct the hearing in accordance with sections 24-4-104 and 24-4-105, C.R.S. No license shall be denied, suspended, or revoked until the board has made its decision. The decision of the board in any disciplinary action or denial of licensure under this section is subject to judicial review by the court of appeals. In order to effectuate the purposes of this part 9, the board has the power to promulgate rules pursuant to article 4 of title 24, C.R.S. In a judicial review proceeding, the court may stay the execution or effect of any final order of the board; but a hearing shall be held affording the parties an opportunity to be heard for the purpose of determining whether the public health, safety, and welfare would be endangered by staying the board’s order. If the court determines that the order should be stayed, it shall also determine at the hearing the amount of the bond and adequacy of the surety, which bond shall be conditioned upon the faithful performance by such petitioner of all obligations as a mortgage loan originator and upon the prompt payment of all damages arising from or caused by the delay in the taking effect of or enforcement of the order complained of and for all costs that may be assessed or required to be paid in connection with such proceedings. In any hearing conducted by the board or an authorized representative of the board in which there is a possibility of the denial, suspension, or revocation of a license because of the conviction of a felony or of a crime involving moral turpitude, the board or its authorized representative shall be governed by section 24-5-101, C.R.S.

§ 12-61-905.7, C.R.S. Subpoena – misdemeanor. (1)

(2)

The board or the administrative law judge appointed for hearings may issue subpoenas, as described in section 12-61-905 (6), which shall be served in the same manner as subpoenas issued by district courts and shall be issued without discrimination between public or private parties requiring the attendance of witnesses or the production of documents at hearings. Any person who willfully fails or neglects to appear and testify or to produce books, papers, or records required by subpoena, duly served upon him or her in any matter conducted under this part 9, is guilty of a misdemeanor and, upon conviction thereof, shall be punished by a fine of one hundred dollars or imprisonment in the county jail for not more than thirty days for each such offense, or by both such fine and imprisonment. Each day such person so refuses or neglects constitutes a separate offense.

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Colorado Real Estate Manual

§ 12-61-906, C.R.S. Immunity. A person participating in good faith in the filing of a complaint or report or participating in an investigation or hearing before the board or an administrative law judge pursuant to this part 9 shall be immune from any liability, civil or criminal, that otherwise might result by reason of such action.

§ 12-61-907, C.R.S. Bond required – rules.

* *

(1)

(2)

(3)

Before receiving a license, an applicant shall post with the board a surety bond in an amount prescribed by the board by rule. A licensed mortgage loan originator shall maintain the required bond at all times. The surety bond may be held by the individual mortgage loan originator or may be in the name of the company by which the mortgage loan originator is employed. The board may adopt rules to further define surety bond requirements. The surety shall not be required to pay a person making a claim upon the bond until a final determination of fraud, forgery, criminal impersonation, or fraudulent representation has been made by a court with jurisdiction. The surety bond shall require the surety to provide notice to the board within thirty days if payment is made from the surety bond or if the bond is cancelled.

§ 12-61-908, C.R.S. Fees – cash fund – created. (1)

(2)

(3)

The board may set the fees for issuance and renewal of licenses and registrations under this part 9. The fees shall be set in amounts that offset the direct and indirect costs of implementing this part 9 and section 38-40-105, C.R.S. The moneys collected pursuant to this section shall be transferred to the state treasurer, who shall credit them to the mortgage company and loan originator licensing cash fund. There is hereby created in the state treasury the mortgage company and loan originator licensing cash fund. Moneys in the fund shall be spent only to implement this part 9 and section 38-40-105, C.R.S., and shall not revert to the general fund at the end of the fiscal year. The fund shall be subject to annual appropriation by the general assembly. For the 2009-10 fiscal year, the division is authorized to expend up to one hundred twelve thousand dollars or such other amount as may be appropriated by the general assembly from the mortgage company and loan originator licensing cash fund for purposes of paying the development costs assessed by the conference of state bank supervisors, or its successor organization, for participating in the nationwide mortgage licensing system and registry. However, the board shall use its discretion in determining whether expenditure of these moneys is necessary for compliance with the federal “Secure and Fair Enforcement for Mortgage Licensing Act of 2008” or participation in the nationwide mortgage licensing system and registry.

§ 12-61-909, C.R.S. Attorney general – district attorney – jurisdiction. The attorney general shall have concurrent jurisdiction with the district attorneys of this state to investigate and prosecute allegations of criminal violations of this part 9.

§ 12-61-910, C.R.S. Violations – injunctions. (1)

(a)

Any individual violating this part 9 by acting as a mortgage loan originator in this state without having obtained a license or by acting as a mortgage loan originator after that individual’s license has been revoked or during any period for which said license may have been suspended is guilty of a class 1 misdemeanor and shall be punished as provided in section 18-1.3-501, C.R.S.; except that, if the violator is not a natural person, the violator shall be punished by a fine of not more than five thousand dollars.

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Chapter 13: Mortgage Loan Originators (b)

(2) (3)

(4)

Each residential mortgage loan negotiated or offered to be negotiated by an unlicensed person shall be a separate violation of this subsection (1). (Deleted by amendment, L. 2007, p. 1742, § 11, effective January 1, 2008.) The board may request that an action be brought in the name of the people of the state of Colorado by the attorney general or the district attorney of the district in which the violation is alleged to have occurred to enjoin a person from engaging in or continuing the violation or from doing any act that furthers the violation. In such an action, an order or judgment may be entered awarding such preliminary or final injunction as is deemed proper by the court. The notice, hearing, or duration of an injunction or restraining order shall be made in accordance with the Colorado rules of civil procedure. A violation of this part 9 shall not affect the validity or enforceability of any mortgage.

§ 12-61-910.2, C.R.S. Prohibited conduct – influencing a real estate appraisal. (1)

A mortgage loan originator shall not, directly or indirectly, compensate, coerce, or intimidate an appraiser, or attempt, directly or indirectly, to compensate, coerce, or intimidate an appraiser, for the purpose of influencing the independent judgment of the appraiser with respect to the value of a dwelling offered as security for repayment of a residential mortgage loan. This prohibition shall not be construed as prohibiting a mortgage loan originator from requesting an appraiser to: (a) Consider additional, appropriate property information; (b) Provide further detail, substantiation, or explanation for the appraiser’s value conclusion; or (c) Correct errors in the appraisal report.

§ 12-61-910.3, C.R.S. Rule-making authority. The board has the authority to promulgate rules as necessary to enable the board to carry out the board’s duties under this part 9. *

§ 12-61-910.4, C.R.S. Nontraditional mortgage products – consumer protections – rules – incorporation of federal interagency guidance. (Repealed)

*

§ 12-61-911, C.R.S. Prohibited conduct – fraud – misrepresentation – conflict of interest – rules. (Repealed) § 12-61-911.5, C.R.S. Acts of employee – mortgage loan originator’s liability. An unlawful act or violation of this part 9 upon the part of an agent or employee of a licensed mortgage loan originator shall not be cause for disciplinary action against a mortgage loan originator unless it appears that the mortgage loan originator knew or should have known of the unlawful act or violation or had been negligent in the supervision of the agent or employee.

§ 12-61-912, C.R.S. Dual status as real estate broker – requirements. (1)

(2)

Unless a mortgage loan originator complies with both subsections (2) and (3) of this section, he or she shall not act as a mortgage loan originator in any transaction in which: (a) The mortgage loan originator acts or has acted as a real estate broker or salesperson; or (b) Another person doing business under the same licensed real estate broker acts or has acted as a real estate broker or salesperson. Before providing mortgage-related services to the borrower, a mortgage loan originator shall make a full and fair disclosure to the borrower, in addition to any other disclosures required by

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Colorado Real Estate Manual

(3)

this part 9 or other laws, of all material features of the loan product and all facts material to the transaction. (a) A real estate broker or salesperson licensed under part 1 of this article who also acts as a mortgage loan originator shall carry on such mortgage loan originator business activities and shall maintain such person’s mortgage loan originator business records separate and apart from the real estate broker or sales activities conducted pursuant to part 1 of this article. Such activities shall be deemed separate and apart even if they are conducted at an office location with a common entrance and mailing address if: (I) Each business is clearly identified by a sign visible to the public; (II) Each business is physically separated within the office facility; and (III) No deception of the public as to the separate identities of the broker business firms results. (b) This subsection (3) shall not require a real estate broker or salesperson licensed under part 1 of this article who also acts as a mortgage loan originator to maintain a physical separation within the office facility for the conduct of its real estate broker or sales and mortgage loan originator activities if the board determines that maintaining such physical separation would constitute an undue financial hardship upon the mortgage loan originator and is unnecessary for the protection of the public.

§ 12-61-913, C.R.S. Written contract required – effect. (Repealed)

*

§ 12-61-914, C.R.S. Written disclosure of fees and costs – contents – limits on fees – lock-in agreement terms – rules. *

(1)

(a)

* * * *

*

* *

*

(b)

*

(2) to (4)

A mortgage loan originator’s disclosures must comply with all applicable requirements of: (I) The federal “Truth in Lending Act”, 15 U.S.C. secs. 1601 et seq., and Regulation Z, 12 CFR 226 and 12 CFR 1026; (II) The federal “Real Estate Settlement Procedures Act of 1974”, 12 U.S.C. secs. 2601 et seq., and Regulation X, 12 CFR 1024 et seq.; (III) The federal “Equal Credit Opportunity Act”, 15 U.S.C. sec. 1691 and Regulation B, 12 CFR 202.9, 202.11, and 202.12 and 12 CFR 1002; (IV) Title V, Subtitle A of the federal “Financial Services Modernization Act of 1999”, also known as the “Gramm-Leach-Bliley Act”, 15 U.S.C. secs. 6801 to 6809, and the federal trade commission’s privacy rules, 16 CFR 313 and 314, adopted in accordance with the federal “Gramm-Leach-Bliley Act”; (V) The federal “Home Mortgage Disclosure Act of 1975”, 12 U.S.C. secs. 2801 et seq., and Regulation C, 12 CFR 203 and 12 CFR 1003, pertaining to home mortgage disclosure; (VI) The “Federal Trade Commission Act of 1914”, 15 U.S.C. sec. 45 (a), and 16 CFR 233; (VII) The federal “Telemarketing and Consumer Fraud and Abuse Prevention Act”, 15 U.S.C. secs. 6101 to 6108, and the federal trade commission’s telemarketing sales rule, 16 CFR 310. The board may, by rule, require mortgage loan originators to comply with other mortgage loan disclosure requirements contained in applicable statutes and regulations in connection with making any residential mortgage loan or engaging in other activity subject to this part 9. (Deleted by amendment, L. 2016.) 13-22

Chapter 13: Mortgage Loan Originators

§ 12-61-915, C.R.S. Fee, commission, or compensation – when permitted – amount. (1)

(2)

(3)

Except as otherwise permitted by subsection (2) or (3) of this section, a mortgage loan originator shall not receive a fee, commission, or compensation of any kind in connection with the preparation or negotiation of a residential mortgage loan unless a borrower actually obtains a loan from a lender on the terms and conditions agreed to by the borrower and mortgage loan originator. If the mortgage loan originator has obtained for the borrower a written commitment from a lender for a loan on the terms and conditions agreed to by the borrower and the mortgage loan originator, and the borrower fails to close on the loan through no fault of the mortgage loan originator, the mortgage loan originator may charge a fee, not to exceed three hundred dollars, for services rendered, preparation of documents, or transfer of documents in the borrower’s file that were prepared or paid for by the borrower if the fee is not otherwise prohibited by the federal “Truth in Lending Act”, 15 U.S.C. sec. 1601, and Regulation Z, 12 CFR 226, as amended. A mortgage loan originator may solicit or receive fees for third-party provider goods or services in advance. Fees for any goods or services not provided shall be refunded to the borrower, and the mortgage loan originator may not charge more for the goods and services than the actual costs of the goods or services charged by the third-party provider.

§ 12-61-916, C.R.S. Confidentiality. (1)

(2)

(3)

Except as otherwise provided in the federal “Secure and Fair Enforcement for Mortgage Licensing Act of 2008”, 12 U.S.C. sec. 5111, the requirements under any federal law or law of this state regarding privacy or confidentiality of any information or material provided to the nationwide mortgage licensing system and registry, and any privilege arising under federal or state law, including the rules of any federal or state court with respect to such information or material, shall apply to the information or material after it has been disclosed to the nationwide mortgage licensing system and registry. The information or material may be shared with all state and federal regulatory officials with mortgage industry oversight authority without the loss of privilege or confidentiality protections provided by federal or state law. The board may enter into agreements with other government agencies, the conference of state bank supervisors, the American association of residential mortgage regulators, or other associations representing government agencies as established by rule. Information or material that is subject to privilege or confidentiality pursuant to subsection (1) of this section shall not be subject to the following: (a) Disclosure under a federal or state law governing the disclosure to the public of information held by an officer or agency of the federal government or the respective state; or (b) Subpoena, discovery, or admission into evidence in any private civil action or administrative process, unless with respect to a privilege held by the nationwide mortgage licensing system and registry regarding the information or material, the person to whom the information or material pertains waives the privilege, in whole or in part.

§ 12-61-917, C.R.S. Mortgage call reports – reports of violations. (1)

(2)

The board may require each licensee or registrant to submit to the nationwide mortgage licensing system and registry mortgage call reports, which shall be in the form and contain the information required by the nationwide mortgage licensing system and registry. The board may report violations of this part 9, enforcement actions, and other relevant information to the nationwide mortgage licensing system and registry.

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Colorado Real Estate Manual

§ 12-61-918, C.R.S. Unique identifier – clearly displayed. Each person required to be licensed or registered shall show his or her or the entity’s unique identifier clearly on all residential mortgage loan application forms and any other documents as specified by the board by rule or order.

§ 12-61-919, C.R.S. Repeal of part. (1) (2)

This part 9 is repealed, effective September 1, 2018. Prior to its repeal, the department of regulatory agencies shall review the licensing of mortgage loan originators and the registration of mortgage companies in accordance with section 24-34104, C.R.S. The department shall include in its review of mortgage loan originators and mortgage companies an analysis of the number and types of complaints made about mortgage loan originators and mortgage companies and whether the licensing of mortgage loan originators and the registration of mortgage companies correlates with public protection from fraudulent activities in the residential mortgage loan industry.

III. Standards for Mortgage Lending and Servicing § 38-40-101, C.R.S. Mortgage broker fees – escrow accounts – unlawful act – penalty. (1)

(2) (3)

(4) (5)

(6)

*

Any funds, other than advanced for actual costs and expenses to be incurred by the mortgage broker on behalf of the applicant for a loan, paid to a mortgage broker as a fee conditioned upon the consummation of a loan secured or to be secured by a mortgage or other transfer of or encumbrance on real estate shall be held in an escrow or a trustee account with a bank or recognized depository in this state. Such account may be any type of checking, demand, passbook, or statement account insured by an agency of the United States government. It is unlawful for a mortgage broker to misappropriate funds held in escrow or a trustee account pursuant to subsection (1) of this section. The withdrawal, transfer, or other use or conversion of any funds held in escrow or a trustee account pursuant to subsection (1) of this section prior to the time a loan secured or to be secured by mortgage or other transfer of or encumbrance on real estate is consummated shall be prima facie evidence of intent to violate subsection (2) of this section. Any mortgage broker violating any of the provisions of subsection (2) of this section commits theft as defined in section 18-4-401, C.R.S. Any mortgage broker violating any of the provisions of subsection (1) or (2) of this section shall be liable to the person from whom any funds were received for the sum of one thousand dollars plus actual damages caused thereby, together with costs and reasonable attorney fees. No lender shall be liable for any act or omission of a mortgage broker under this section. As used in this section, unless the context otherwise requires, “mortgage broker” means a person, firm, partnership, association, or corporation, other than a bank, trust company, savings and loan association, credit union, supervised lender as defined in section 5-1-301 (46), C.R.S., insurance company, federal housing administration approved mortgagee, land mortgagee, or farm loan association or duly appointed loan correspondents, acting through officers, partners, or regular salaried employees for any such entity, that engages in negotiating or offering or attempting to negotiate for a borrower, and for commission, money, or other thing of value, a loan to be consummated and funded by someone other than the one acting for the borrower.

§ 38-40-102, C.R.S. Disclosure of costs – statement of terms of indebtedness. (Repealed)

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Chapter 13: Mortgage Loan Originators

§ 38-40-103, C.R.S. Servicing of mortgages and deeds of trust – liability for interest or late fees for property taxes. (1)

(2)

(3)

(4)

(a)

(I)

Any person who regularly engages in the collection of payments on mortgages and deeds of trust for owners of evidences of debt secured by mortgages or deeds of trust shall promptly credit all payments which are received and which are required to be accepted by such person or his agent and shall promptly perform all duties imposed by law and all duties imposed upon the servicer by such evidences of debt, mortgages, or deeds of trust creating or securing the indebtedness. (II) No more than twenty days after the date of transfer of the servicing or collection rights and duties to another person, the transferor of such rights and duties shall mail a notice addressed to the debtor from whom it has been collecting payments at the address shown on its records, notifying such debtor of the transfer of the servicing of his or her debt and the name, address, and telephone number of the transferee of the servicing. (b) The debtor may continue to make payments to the transferor of the servicing of his or her loan until a notice of the transfer is received from the transferee containing the name, address, and telephone number of the new servicer of the loan to whom future payments should be made. Such notice may be combined with the notice required in subparagraph (II) of paragraph (a) of this subsection (1). It shall be the responsibility of the transferor to forward to the transferee any payments received and due after the date of transfer of the loan. The servicer of a loan shall respond in writing within twenty days from the receipt of a written request from the debtor or from an agent of the debtor acting pursuant to written authority from the debtor for information concerning the debtor’s loan, which is readily available to the servicer from its books and records and which would not constitute the rendering of legal advice. Any such response must include the telephone number of the servicer. The servicer shall not be liable for any damage or harm that might arise from the release of any information pursuant to this section. The servicer of a loan shall annually provide to the debtor a summary of activity related to the loan. Such a summary shall contain, but need not be limited to, the total amount of principal and interest paid on the loan in that calendar year. The servicer of a loan shall be liable for any interest or late fees charged by any taxing entity if funds for the full payment of taxes on the real estate have been held in an escrow account by such servicer and not remitted to the taxing entity when due.

§ 38-40-103.5, C.R.S. Notice upon transfer of servicing rights – prior servicer’s offer to borrower survives transfer – definitions. (1)

As used in this section: (a) “Borrower” means a person liable under an evidence of debt constituting a residential mortgage loan. (b) “Evidence of debt” has the meaning set forth in section 38-38-100.3 (8). (c) “Holder” means the holder of an evidence of debt constituting a residential mortgage loan. (d) “Residential mortgage loan” has the meaning set forth in section 12-61-902, C.R.S. (e) (I) “Servicer” means a person who collects, receives, or has the right to collect or receive payments on behalf of a holder, including payments of principal, interest, escrow amounts, and other amounts due on obligations due and owing to the holder. 13-25

Colorado Real Estate Manual “Servicer” includes: (A) The person or entity to whom payments are to be sent, as listed on the most recent billing statement or payment coupon provided to the borrower; or (B) A subsidiary, affiliate, or assignee of a servicer, however designated, including a person designated as a subservicer. A servicer to whom servicing rights for a residential mortgage loan have been sold or transferred by the holder or by a predecessor servicer is subject to, and shall honor, the borrower’s acceptance, prior to the sale or transfer of servicing rights, of any offer previously made by the holder or predecessor servicer in connection with a modification of a residential mortgage loan. At the time of the transfer or sale of servicing rights for a residential mortgage loan, the transferor or seller shall inform the buyer or transferee of the servicing rights whether a loan modification is pending. A contract for the transfer or sale of servicing rights for a residential mortgage loan must obligate the successor servicer to: (a) Accept and continue processing any pending loan modification requests; and (b) Honor any trial and permanent loan modification agreements entered into by the prior servicer. (II)

(2)

(3)

(4)

§ 38-40-104, C.R.S. Cause of action — attorney fees. (1)

(2)

If any applicant or debtor is aggrieved by a violation of section 38-40-102, 38-40-103, or 3840-103.5 and the violation is not remedied in a reasonable, timely, and good faith manner by the party obligated to do so, and after a good faith effort to resolve the dispute is made by the debtor or borrower, the debtor or borrower may bring an action in a court of competent jurisdiction for any such violation. If the court finds that actual damages have occurred, the court shall award to the debtor or borrower, in addition to actual damages, the amount of one thousand dollars, together with costs and reasonable attorney fees. A transferee from a lender is not liable for any act or omission of the lender under section 3840-102. A transferee of servicing or collection rights is not liable for any act or omission of the transferor of those rights under section 38-40-103 or 38-40-103.5.

§ 38-40-105, C.R.S. Prohibited acts by participants in certain mortgage loan transactions – unconscionable acts and practices – definitions. (1)

The following acts by any mortgage broker, mortgage originator, mortgage lender, mortgage loan applicant, real estate appraiser, or closing agent, other than a person who provides closing or settlement services subject to regulation by the division of insurance, with respect to any loan that is secured by a first or subordinate mortgage or deed or trust lien against a dwelling are prohibited: (a) To knowingly advertise, display, distribute, broadcast, televise, or cause or permit to be advertised, displayed, distributed, broadcast, or televised, in any manner, any false, misleading, or deceptive statement with regard to rates, terms, or conditions for a mortgage loan; (b) To make a false promise or misrepresentation or conceal an essential or material fact to entice either a borrower or a creditor to enter into a mortgage agreement when, under the terms and circumstances of the transaction, he or she knew or reasonably should have known of such falsity, misrepresentation, or concealment; (c) To knowingly and with intent to defraud present, cause to be presented, or prepare with knowledge or belief that it will be presented to or by a lender or an agent thereof any written statement or information in support of an application for a mortgage loan that he 13-26

Chapter 13: Mortgage Loan Originators

*

or she knows to contain false information concerning any fact material thereto or if he or she knowingly and with intent to defraud or mislead conceals information concerning any fact material thereto; (d) To facilitate the consummation of a mortgage loan agreement that is unconscionable given the terms and circumstances of the transaction; (e) To knowingly facilitate the consummation of a mortgage loan transaction that violates, or that is connected with a violation of, section 12-61-905.5, C.R.S. (f) (Deleted by amendment, L. 2009, (HB 09-1085), ch. 303, p. 1638, § 4, effective August 5, 2009.) (1.5) (Deleted by amendment, L. 2009, (HB 09-1085), ch. 303, p. 1638, § 4, effective August 5, 2009.) (1.7) (a) A mortgage broker or mortgage originator shall not commit, or assist or facilitate the commission of, the following acts or practices, which are hereby deemed unconscionable: (I) Engaging in a pattern or practice of providing residential mortgage loans to consumers based predominantly on acquisition of the foreclosure or liquidation value of the consumer’s collateral without regard to the consumer’s ability to repay a loan in accordance with its terms; except that any reasonable method may be used to determine a borrower’s ability to repay. This subparagraph (I) shall not apply to a reverse mortgage that complies with article 38 of title 11, C.R.S. (II) Knowingly or intentionally flipping a residential mortgage loan. As used in this subparagraph (II), “flipping” means making a residential mortgage loan that refinances an existing residential mortgage loan when the new loan does not have reasonable, tangible net benefit to the consumer considering all of the circumstances, including the terms of both the new and refinanced loans, the cost of the new loan, and the consumer’s circumstances. This subparagraph (II) applies regardless of whether the interest rate, points, fees, and charges paid or payable by the consumer in connection with the refinancing exceed any thresholds specified by law. (III) Entering into a residential mortgage loan transaction knowing there was no reasonable probability of payment of the obligation by the consumer. (b) Except as this subsection (1.7) may be enforced by the attorney general or a district attorney, only the original parties to a transaction shall have a right of action under this subsection (1.7), and no action or claim under this subsection (1.7) may be brought against a purchaser from, or assignee of, a party to the transaction. (2) (a) Except as provided in subsection (5) of this section, if a court, as a matter of law, finds a mortgage contract or any clause of the contract to have been unconscionable at the time it was made, the court may refuse to enforce the contract, or it may enforce the remainder of the contract without the unconscionable clause, or it may so limit the application of any unconscionable clause as to avoid any unconscionable result. (b) When it is claimed or appears to the court that the contract or any clause thereof may be unconscionable, the parties shall be afforded a reasonable opportunity to present evidence as to its commercial setting, purpose, and effect, to aid the court in making the determination. (c) (I) In order to support a finding of unconscionability, there must be evidence of some bad faith overreaching on the part of the mortgage broker or mortgage originator such as that which results from an unreasonable inequality of bargaining power or under other circumstances in which there is an absence of meaningful choice on the part of one of the parties, together with contract terms that are, under standard

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(3) (4) (5)

(6)

(7)

industry practices, unreasonably favorable to the mortgage broker, mortgage originator, or lender. (II) This paragraph (c) shall not apply to an unconscionable act or practice under subsection (1.7) of this section. A violation of this section shall be deemed a deceptive trade practice as provided in section 6-1105 (1) (uu), C.R.S. The provisions of this section are in addition to and are not intended to supersede the deceptive trade practices actionable at common law or under other statutes of this state. No right or claim arising under this section may be raised or asserted in any proceeding against a bona fide purchaser of such mortgage contract or in any proceeding to obtain an order authorizing sale of property by a public trustee as required by section 38-38-105. The following acts by any real estate agent or real estate broker, as defined in section 12-61101, C.R.S., in connection with any residential mortgage loan transaction, are prohibited: (a) If directly engaged in negotiating, originating, or offering or attempting to negotiate or originate for a borrower a residential mortgage loan transaction, the real estate agent or real estate broker shall not make a false promise or misrepresentation or conceal an essential or material fact to entice either a borrower or lender to enter into a mortgage loan agreement when the real estate agent or real estate broker actually knew or, under the terms and circumstances of the transaction, reasonably should have known of such falsity, misrepresentation, or concealment. (b) If not directly engaged in negotiating, originating, or offering or attempting to negotiate or originate for a borrower a residential mortgage loan transaction, the real estate agent or real estate broker shall not make a false promise or misrepresentation or conceal an essential or material fact to entice either a borrower or lender to enter into a mortgage loan agreement when the real estate agent or real estate broker had actual knowledge of such falsity, misrepresentation, or concealment. As used in this section, unless the context otherwise requires: (a) “Consumer” has the meaning set forth in section 5-1-301, C.R.S. (b) “Dwelling” has the meaning set forth in section 5-1-301, C.R.S. (c) “Mortgage broker” has the same meaning as “mortgage loan originator” as set forth in section 12-61-902, C.R.S. (d) “Mortgage lender” has the meaning set forth in section 12-61-902, C.R.S. (e) “Mortgage originator” has the same meaning as “mortgage loan originator” as set forth in section 12-61-902, C.R.S. (f) “Originate” has the same meaning as “originate a mortgage” as set forth in section 12-61902, C.R.S. (g) “Residential mortgage loan” has the meaning set forth in section 12-61-902, C.R.S.

IV. Loan Fraud Legislative declaration (1)

(2)

The general assembly hereby determines that mortgage lending has a significant effect upon Colorado’s economy; an estimated two trillion five hundred billion dollars in mortgage loans were made in the United States in 2005; an estimated eighty percent of reported mortgage fraud involves collusion by industry insiders; and Colorado’s per capita incidents of mortgage fraud is one of the ten highest in the nation. The general assembly hereby declares that the high rates of mortgage fraud in Colorado are unacceptable and that residential mortgage fraud shall not be tolerated. The general assembly 13-28

Chapter 13: Mortgage Loan Originators further declares that the goals of Colorado law are to deter residential mortgage fraud and to make the victim whole.

§ 18-4-401, C.R.S. Theft. (9)

(a)

(b)

(c)

(d)

(e)

If a person is convicted of or pleads guilty or nolo contendere to theft by deception and the underlying factual basis of the case involves the mortgage lending process, a minimum fine of the amount of pecuniary harm resulting from the theft shall be mandatory, in addition to any other penalty the court may impose. A court shall not accept a plea of guilty or nolo contendere to another offense from a person charged with a violation of this section that involves the mortgage lending process unless the plea agreement contains an order of restitution in accordance with part 6 of article 1.3 of this title that compensates the victim for any costs to the victim caused by the offense. The district attorneys and the attorney general have concurrent jurisdiction to investigate and prosecute a violation of this section that involves making false statements or filing or facilitating the use of a document known to contain a false statement or material omission relied upon by another person in the mortgage lending process. Documents involved in the mortgage lending process include, but are not limited to, uniform residential loan applications or other loan applications; appraisal reports; HUD-1 settlement statements; supporting personal documentation for loan applications such as W-2 forms, verifications of income and employment, bank statements, tax returns, and payroll stubs; and any required disclosures. For the purposes of this subsection (9): (I) “Mortgage lending process” means the process through which a person seeks or obtains a residential mortgage loan, including, without limitation, solicitation, application, or origination; negotiation of terms; third-party provider services; underwriting; signing and closing; funding of the loan; and perfecting and releasing the mortgage. (II) “Residential mortgage loan” means a loan or agreement to extend credit, made to a person and secured by a mortgage or lien on residential real property, including, but not limited to, the refinancing or renewal of a loan secured by residential real property. (III) “Residential real property” means real property used as a residence and containing no more than four families housed separately.

§ 13-21-125, C.R.S. Civil actions for theft in the mortgage lending process. A person who suffers damages as a result of a violation of section 18-4-401, C.R.S., in the mortgage lending process, as defined by section 18-4-401 (9) (e) (I), C.R.S., shall have a private civil right of action against the perpetrator, regardless of whether the perpetrator was convicted of the crime. A claim arising under this section shall not be asserted against a bona fide purchaser of a mortgage contract.

§ 18-5-208, C.R.S. Dual contracts to induce loan. It is a class 3 misdemeanor for any person to knowingly make, issue, deliver, or receive dual contracts for the purchase or sale of real property. The term “dual contracts”, either written or oral, means two separate contracts concerning the same parcel of real property, one of which states the true and actual purchase price and one of which states a purchase price in excess of the true and actual purchase price, and is used, or intended to be used, to induce persons to make a loan or a loan commitment on such real property in reliance upon the stated inflated value. 13-29

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.... Loan fraud has become one of the largest areas of white-collar crime and is a recurring subject of Commission disciplinary actions. Loan fraud includes falsified loan applications; fictitious income, employment, or deposit verifications; false occupancy claims; undisclosed buyer rebates or credits; and a host of other items, which can be considered dual contracting. Loan fraud may also result in disbarment by HUD from all federal programs, large fines, and federal prosecution. Since virtually all loan programs are affiliated with the federal government in either the primary or secondary mortgage market, disbarment can mean the end of a career in real estate, appraisal, and lending or related fields.

V. Mortgage Loan Originator Rules DEPARTMENT OF REGULATORY AGENCIES DIVISION OF REAL ESTATE RULES REGARDING MORTGAGE LOAN ORIGINATORS 4 CCR 725-3 CHAPTER 1: DEFINITIONS 1.1 1.2

1.3 1.4

1.5

Address: The street address, city, state and postal code. Adjustable Rate Mortgage: A mortgage in which the teaser rate, payment rate, or interest rate changes periodically and, in some cases, may adjust according to corresponding fluctuations in an index. Adjustment Date: The date the teaser rate, payment rate, or interest rate changes on an adjustable rate mortgage. Advertisement: Any commercial message that promotes consumer credit. Advertisements may appear: A. In newspapers, magazines, leaflets, flyers, catalogs, direct mail literature, or other printed material; B. On radio, television, or a public address system; C. On an inside or outside sign or display, or a window display; D. In point-of-sale literature, price tags, signs, and billboards; or E. Online, such as on the internet. Bona Fide Nonprofit Organization: An organization that complies with the following criteria: A. Has the status of tax-exempt organization under Section 501(c)(3) of the Internal Revenue Code of 1986, incorporated by reference in compliance with Section 24-4103(12.5), C.R.S., and does not include later amendments or editions of the Code. A certified copy of the Code is readily available for public inspection at the offices of the Board of Mortgage Loan Originators at 1560 Broadway Suite 925, Denver, Colorado. The Internal Revenue Code of 1986 may be examined at the internet website of the Internal Revenue Service at www.irs.gov. The Internal Revenue Service may also be contacted at 1999 Broadway, Denver, Colorado 80202 or by telephone at (303) 4461675; B. Promotes affordable housing or provides homeownership education, or similar services;

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1.6

1.7

1.8

1.9

1.10

1.11

1.12 1.13 1.14

1.15

Conducts its activities in a manner that serves public and charitable purposes, rather than commercial purposes; D. Receives funding and revenue and charges fees in a manner that does not incentivize it or its employees to act other than in the best interests of its clients; E. Compensates its employees to act other than in the best interests of its clients; and F. Provides or identifies for the borrower residential mortgage loans with terms favorable to the borrower and comparable to mortgage loans and housing assistance provided under the government housing assistance programs. Business Day: A. General business day means a day on which the offices of the creditor are open to the public carrying on substantially all of the creditor's business functions. B. Specific business day means all calendar days except Sundays and federal holidays. Business Name: The company for which individuals who originate a mortgage, offer to originate a mortgage, act as a mortgage loan originator, or offer to act as a mortgage loan originator are officers, partners, members, managers, owners, exclusive agents, contractors, independent contractors or employees. Consumer Credit: may be either closed-end or open-end credit. It is credit that is extended primarily for personal, family, or household purposes. It excludes business and agricultural loans, and loans exceeding $ 25,000 that are not secured by real property or a dwelling. It also must be extended by a “creditor”. Creditor: Is a person or organization (a) that regularly extends consumer credit for which a finance charge is required or that is repayable in more than four installments even without a finance charge, and (b) to whom the obligation is initially payable—for example, the finance company, bank, automobile dealer or other lender identified on the face of the credit agreement. A person or organization is considered to extend credit “regularly,” if it has extended credit more than 25 times during the preceding year or more than 5 times for transactions secured by dwellings. Employee: An individual whose manner and means of performance of work are subject to the right of control of, or are controlled by, a person, and whose compensation for federal income tax purposes is reported, or required to be reported, on a W-2 form issued by the controlling person. Finance Charge: The dollar amount charged for credit. It includes interest and other costs, such as service charges, transaction charges, buyer’s points, loan fees, and mortgage insurance. It also includes the premiums for credit life, accident, and health insurance, if required, and for property insurance, unless the buyer may select the insurer. Fixed Term: The length of time a teaser rate, payment rate, or interest rate, is fixed and will not adjust. Good Faith Estimate Disclosure: Is the Disclosure form established in the Real Estate Settlement Procedures Act, Part 3500, Appendix C. Housing Finance Agency: An authority that is chartered by the State of Colorado to help meet the affordable housing needs of the residents of Colorado; is supervised directly or indirectly by the state government; is subject to audit and review by the State of Colorado; and whose activities make it eligible to be a member of the National Council of State Housing Agencies. HUD Approved Housing Counseling Agency: is an agency which is either a private or public nonprofit organization that is exempt from taxation under Section 501(a) pursuant to Section 501(c), of the Internal Revenue Code of 1996, 26, U.S.C. 501(a) and 501(c), and approved by the U.S. Department of Housing and Urban Development, in accordance with Housing Counseling Program Handbook 7610.1 and Code of Federal Regulations Title 24, Part 214. 13-31

Colorado Real Estate Manual 1.16 Independent Contractor: An individual who performs his or her duties other than at the direction of and subject to the supervision and instruction of an individual who is licensed by the Board or is not required to be licensed based on one of the following: A. The individual is lawfully registered with, and maintains a unique identifier through, the Nationwide Mortgage Licensing System and Registry, and who is an employee of: 1. A depository institution; 2. A subsidiary that is: a. Owned and controlled by a depository institution; and b. Regulated by a Federal banking agency; or 3. An institution regulated by the Farm Credit Administration; or B. An individual who is an employee of a federal, state, or local government agency or housing finance agency and who acts as a loan originator only pursuant to his or her official duties as an employee of a federal, state, or local government agency or housing finance agency; or C. An employee of a bona fie nonprofit organization who acts as a loan originator only with respect to his or her work duties to the bona fide nonprofit organization, and who acts as a loan originator only with respect to residential mortgage loans with terms that are favorable to the borrower. 1.17 Index: The index for an adjustable rate mortgage. 1.18 Initial Adjustment Cap: The limit on how much the interest or payment rate can change at the first adjustment period. 1.19 Interest Rate: The rate used to calculate a borrower’s monthly interest payment. 1.20 Life Cap: The limit on how much the interest or payment rate can change over the life of the loan. 1.21 Loan Modification: A temporary or permanent change in one or more of the terms of a mortgagor’s existing loan, allows the loan to be reinstated, and often results in a more affordable mortgage payment. The borrower retains ownership of the real property and the mortgage note and the deed of trust remains intact. 1.22 Loan Modifier: An individual who in the course of the person’s business, vocation, or occupation offers to assist, provide, or negotiate on behalf of a borrower to facilitate the receipt of a loan modification from the borrower’s current mortgage lender, generally for a fee or other thing of value. 1.23 Offering or Negotiating Terms of a Residential Mortgage Loan: To present for consideration to a borrower or prospective borrower particular residential mortgage loan terms, or to communicate directly or indirectly with a borrower, or prospective borrower for the purpose of reaching a mutual understanding about prospective residential mortgage loan terms. An individual’s generic referral to or recommendation of a particular lender in and of itself, is not offering or negotiating the terms of a residential mortgage loan. 1.24 Payment Rate: The rate used to determine a borrower’s monthly payment. 1.25 Payment Type: Is the principal and interest, interest only or negative amortization. 1.26 Physical Address: The physical location of the property. 1.27 Prepayment Penalty: A fee assessed pursuant to the terms of the loan on a borrower who repays all or part of the principal of a loan before it is due. Prepayment penalties do not include interest payments of thirty (30) days or less that may be assessed pursuant to the terms of some FHA or VA loans. Prepayment penalties for the purpose of this rule do not include termination fees of $ 500.00 or less that are associated with home equity lines of credit.

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Chapter 13: Mortgage Loan Originators 1.28 Rate: The teaser rate, payment rate or interest rate used to determine a borrower’s monthly payment or deferred interest specific to reverse mortgage transactions. 1.29 Application: means the submission of a consumer’s financial information for the purposes of obtaining an extension of credit and consists of the submission of the following six pieces of information: (1) the consumer’s name; (2) the consumer’s income; (3) the consumer’s social security number to obtain a credit report; (4) the property address; (5) an estimate of the value of the property; and (6) the mortgage loan amount sought. 1.30 Safe and Secure Manner: Reasonable measures are taken to minimize the risk of loss, damage, or theft. 1.31 Short Sale: The sale of a real property for less than the mortgage loan balance. In the settlement of the short sale transaction the existing mortgage is extinguished. Any deficiency created from the settlement of the transaction may be transformed into a promissory note, charged off, forgiven, or pursued as a judgment against the previous owner. 1.32 Taking a Residential Mortgage Loan Application: The receipt of a residential mortgage loan application by an individual for the purpose of facilitating a decision whether to extend an offer of residential mortgage loan terms to a borrower or prospective borrower, whether the application is received directly or indirectly from the borrower or prospective borrower. An individual’s generic referral to or recommendation of a particular lender, in and of itself, is not taking a residential loan application. 1.33 Teaser Rate: A temporary and often low introductory rate on an adjustable rate mortgage. 1.34 Truth-in-Lending Disclosure: Is the disclosure form established by the Truth in Lending Act, specific to Regulation Z, Appendices H-2, H-3, H-4(a), (b), (c) and (d). 1.35 Uniform Residential Loan Application: Is the Freddie Mac form 65 or the Fannie Mae form 1003 used in residential loan transactions on properties of four or fewer units. 1.36 TILA-RESPA Integrated Disclosure Rule: means the Consumer Financial Protection Bureau’s Integrated Mortgage Disclosures final rule, set forth in 12 C.F.R. § 1024, et seq., the Real Estate Settlement Procedures Act (Regulation X), and in 12 C.F.R. § 1026, et seq., the Truth in Lending Act (Regulation Z), effective October 3, 2015, incorporated by reference in compliance with Section 24-4-103(12.5), C.R.S., and does not include any later amendments or editions of the final rule. A certified copy of the TILA-RESPA Integrated Disclosure rule is readily available for public inspection at the offices of the Board of Mortgage Loan Originators at 1560 Broadway, Suite 925, Denver, Colorado. The TILA-RESPA Integrated Disclosure rule may be examined at the internet website of the Consumer Financial Protection Bureau at www.consumerfinance.gov. The Consumer Financial Protection Bureau may also be contacted at 1700 G Street, NW, Washington, D.C. 20552 or by telephone at (202) 435-7000. 1.37 MLO Compensation Rule: means the Consumer Financial Protection Bureau’s Loan Originator Compensation rule set forth in 12 C.F.R. § 1026 et seq., Truth in Lending Act (Regulation Z), effective January 10, 2014, incorporated by reference in compliance with Section 24-4103(12.5), C.R.S., and does not include any later amendments or editions of the final rule. A certified copy of the MLO Compensation rule is readily available for public inspection at the offices of the Board of Mortgage Loan Originators at 1560 Broadway, Suite 925, Denver, Colorado. The MLO Compensation rule may be examined at the internet website of the Consumer Financial Protection Bureau at www.consumerfinance.gov. The Consumer Financial Protection Bureau may also be contacted at 1700 G Street, NW, Washington, D.C. 20552 or by telephone at (202) 435-7000. 1.38 Colorado Lock-in Disclosure: means the Colorado Lock-in Disclosure form created by the Board of Mortgage Loan Originators. This form is to be used for any loan application or transaction that is exempt from the TILA-RESPA Integrated Disclosure rule. This disclosure may be found on the Division of Real Estate’s Website. A mortgage loan originator may use an 13-33

Colorado Real Estate Manual alternate form if the alternate form includes all information required on the Colorado Lock-in Disclosure form, as determined by the Board. CHAPTER 2: REQUIREMENTS FOR LICENSURE 2.1

An applicant for licensure as a Colorado mortgage loan originator shall successfully complete the requirements set forth below: A. Submit a set of fingerprints for a criminal history check to the Colorado Bureau of Investigations (CBI) within 1 year immediately preceding the date of application; B. Register with the Nationwide Mortgage Licensing System and Registry in accordance with policies and procedures established by the Nationwide Mortgage Licensing System and Registry. This includes, but is not limited to completion of the correct registration application, authorization for the registry to pull a credit report and payment of any fees associated with registration; C. Submit fingerprints to the Nationwide Mortgage Licensing System and Registry in accordance with policies and procedures established by the Nationwide Mortgage Licensing System and Registry; D. Complete the 20 hours of pre-licensing education reviewed and approved by the Nationwide Mortgage Licensing System and Registry or by a company contracted by the Nationwide Mortgage Licensing System and Registry for the review and approval of prelicensing courses; 1. Effective March 1, 2016, applicants must also complete two (2) hours of Colorado specific pre-licensing education reviewed and approved by the Nationwide Mortgage Licensing System and Registry or by a company contracted by the Nationwide Mortgage Licensing System and Registry for the review and approval of prelicensing courses. 2. The two (2) hours of Colorado specific education replaces what was a required general elective within the 20 hours of pre-licensing education. 3. Applicants may also complete the two (2) hours of Colorado specific pre-licensing education as a standalone course outside of the 20 hour pre-licensing education. 4. The two (2) hours of Colorado specific education must have a final examination that covers all major topics covered in the course. Applicants must receive a passing score of 75% on the Colorado specific education examination. E. Successful completion of the S.A.F.E. Mortgage Loan Originator examination, developed by the Nationwide Mortgage Licensing System and Registry, consisting of two sections. These two sections include a national component and a Uniform State Test (UST) component. An individual shall pass the test in accordance with policies and procedures developed and administered by the Nationwide Mortgage Licensing System and Registry and in compliance with the S.A.F.E. Mortgage Licensing Act; F. Acquisition of a surety bond as required by § 12-61-907, C.R.S. and in accordance with any rule of the Board that directly or indirectly addresses surety bond requirements; G. Acquisition of the errors and omissions insurance required by § 12-61-903.5, C.R.S. and in accordance with any rule of the Board that directly or indirectly addresses errors and omissions insurance requirements; H. Completion of the Colorado Division of Real Estate specific Mortgage Loan Originator Application; and I. Payment of the application fee established by the Board and is non-refundable.

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Chapter 13: Mortgage Loan Originators 2.2

2.3

2.4

2.5

Authority to audit education provider The Board or the Board’s designee may audit any mortgage loan originator courses offered and may request from each education provider or schools offering such courses, all related instructional materials, student attendance records and other information that may be necessary for an audit. Failure to comply with this rule may result in the withdrawal of course approval. Retesting A. An individual may retake a test three (3) consecutive times with each consecutive taking occurring at least thirty (30) days after the preceding test. B. After failing three (3) consecutive tests, an individual shall wait at least six (6) months before taking the test again. C. Individuals who fail to maintain a valid license for a period of five (5) years or longer shall retake the test prior to re-application, not taking into account any time during which such individual was licensed. Temporary license Mortgage loan originators demonstrating to the Board a good-faith effort to comply with the requirements pursuant to § 12-61-901, et seq., C.R.S. may be issued a temporary license upon completion of the requirements set forth below: A. The individual has completed all requirements set forth by the Nationwide Mortgage Licensing System and Registry, including payment of requisite fees, and has been approved by the Board of Mortgage Loan Originators on the Nationwide Mortgage Licensing System and Registry; B. Prior to submitting an application, a set of fingerprints for a criminal history record check must be submitted to the Colorado Bureau of Investigation (CBI); C. Acquisition of a surety bond as required by § 12-61-907, C.R.S. and in accordance with any rule of the Board that directly or indirectly addresses surety bond requirements; D. Acquisition of the errors and omissions insurance required by § 12-61-903.5, C.R.S. and in accordance with any rule of the Board that directly or indirectly addresses errors and omissions insurance requirements; E. Completion of the Colorado Division of Real Estate specific Mortgage Loan Originator Application; and F. Payment of the application fee established by the Board and is non-refundable. Only individuals who are licensed as state-licensed loan originators may hire and sponsor unlicensed mortgage loan originators under the temporary license provision. A. Licensed mortgage loan originators who employ and sponsor such a temporarily licensed mortgage loan originator shall be held responsible under all applicable provisions of law, including without limitation this Part 9 and § 38-40-105, C.R.S., for the actions of the temporarily licensed mortgage loan originator to whom a temporary license has been assigned, and are personally subject to all applicable penalties under the law. B. Licensed mortgage loan originators shall notify the Division of Real Estate, in a manner acceptable to the Board, of exact dates of hire and termination of employment for temporarily licensed mortgage loan originators. Sponsoring mortgage loan originators shall complete the mortgage loan originator temporary license update form, and forward to the Division of Real Estate, in a manner acceptable to the Board, all other information required for the possible receipt of a temporary license. C. Licensed mortgage loan originators shall be held responsible for the activity of temporarily licensed mortgage loan originators through and including the date of termination and required notification of such termination to the Division of Real Estate.

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2.7 2.8 2.9 2.10 2.11

2.12

2.13 2.14

Temporary licenses shall expire 120 days after completion of the Mortgage Loan Originator License Application or when the temporary license is terminated by a licensed mortgage loan originator with whom the temporary licensee is operating under. Individuals seeking temporary licenses shall be granted one temporary license. Additional or extended temporary licenses shall be prohibited. Temporary licensees shall request on the application that the Board inactivate their temporary license upon determination by the Board that the requirements of the law have not been met. Any temporary license issued by the Board shall have the same force and effect of the license required by § 12-61-901, et seq., C.R.S. for the period of time it is in effect. Once the applicant fully complies with the terms of the law as determined by the Board, the Board shall license the applicant in accordance with § 12-61-903, C.R.S. Preliminary advisory opinion Potential applicants for a state license or a registration through the Nationwide Mortgage Licensing System and Registry may submit information in order for the Board or an authorized representative of the Board to reasonably ascertain the likelihood of license or registration approval through a defined preliminary advisory opinion process. Potential applicants may request a preliminary advisory opinion for any of the following reasons: A. If the individual has been convicted, plead guilty or nolo contendere to any crime in a domestic, foreign or military court. B. If the individual has been enjoined in the immediately preceding five (5) years under domestic or foreign laws from engaging in deceptive conduct relating to the origination of a mortgage loan; C. If the individual has had other professional licenses, certifications or registrations issued by Colorado, the District of Columbia, any other states or foreign countries, revoked or suspended for fraud, theft, deceit, material misrepresentations or the breach of a fiduciary duty and such suspension or revocation denied authorization to practices as: a mortgage loan originator or similar license; real estate broker; real estate appraiser; an insurance producer; an attorney; a securities broker-dealer; a securities sales representative; an investment advisor; or an investment advisor representative; or D. If the individual has been assessed a civil or criminal penalty for violating any provision of the Colorado Consumer Protection Act. Individuals requesting a preliminary advisory opinion shall complete the Preliminary Advisory Application located on the Division of Real Estate’s website. Individuals requesting a preliminary advisory opinion shall submit all corresponding, or relevant documents related to any conduct or actions as set forth in Rule 2.12. Incomplete requests will not be processed. The Board or an authorized representative of the Board may, at any time, request additional information regarding the preliminary advisory opinion request. Such corresponding, relevant or related documents may include, but are not limited to: A. Police officer reports; B. Dispositions documents; C. Court documents; D. Original charges documents; E. Stipulated agreements; or F. Final Agency Orders.

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Chapter 13: Mortgage Loan Originators 2.15 individuals requesting a preliminary advisory opinion shall submit a written and signed personal explanation and detailed account of the facts and circumstances. 2.16 Any preliminary advisory opinion shall not be binding on the Board or limit the Board’s authority to investigate a future formal application for licensure. 2.17 An individual seeking a preliminary advisory opinion is not an applicant for licensure and the issuance of an unfavorable opinion shall not prevent such individual from making application for licensure pursuant to the Mortgage Loan Originator Licensing Act. 2.18 The Board or an authorized representative of the Board will provide a favorable or an unfavorable opinion. 2.19 Surety bond Mortgage loan originators are deemed compliant with the surety bond requirement if their surety bond meets the requirements defined in one of the following options: A. Mortgage loan originators, at a minimum, may acquire and maintain an individual surety bond if: 1. The surety bond is in the amount of $25,000.00; 2. The surety bond is in conformance with all relevant Colorado statutory requirements; 3. The surety bond is exclusive to covering acts contemplated under current Colorado mortgage loan originator licensing laws; 4. The surety bond is not applicable to any conduct or transactions outside the jurisdiction of the Board; and 5. The surety bond is identical to the individual surety bond form developed and approved by the Board. B. Mortgage loan originators who are W-2 employees or exclusive agents for companies with less than 20 individuals who are required to be licensed pursuant to current Colorado mortgage loan originator licensing laws and who do not work for more than one company, may, at a minimum, operate under their company’s surety bond if the surety bond meets the following criteria: 1. The surety bond is in the amount of $100,000.00; 2. The surety bond is in conformance with all relevant Colorado statutory requirements; 3. The surety bond is exclusive to covering acts of all of the company’s W-2 employees or exclusive agents contemplated under current Colorado mortgage loan originator licensing laws; and 4. The surety bond is identical to the individual surety bond form developed and approved by the Board. C. Mortgage loan originators who are W-2 employees or exclusive agents for companies with 20 or more individuals who are required to be licensed pursuant to current Colorado mortgage loan originator licensing laws and who do not work for more than one company, may, at a minimum, operate under a company’s surety bond if the surety bond meets the following criteria: 1. The surety bond is in the amount of $200,000.00; 2. The surety bond is in conformance with all relevant Colorado statutory requirements; 3. The surety bond is exclusive to covering acts of all of the company’s W-2 employees or exclusive agents contemplated under current Colorado mortgage loan originator licensing laws; and 4. The surety bond is identical to the company surety bond form developed and approved by the Board.

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Colorado Real Estate Manual 2.20 Regarding company surety bonds, the company shall provide the Board or an authorized representative of the Board with any and all requested surety bonds relevant to Rule 2.19 or current mortgage loan originator license laws and shall verify and provide adequate proof regarding the timeline of employment for each individual operating under such company policy. Failure on the part of the company to provide such information shall result in noncompliance regarding the surety bond requirement for individual licensees operating under such company bond. 2.21 Mortgage loan originators shall be required to provide proof of continuous surety bond coverage and that all required information is current. The mortgage loan originator may update all required information electronically on the Division of Real Estate’s website. 2.22 Any licensee who so fails to obtain and maintain a surety bond in accordance with Board Rules or fails to provide proof of continuous coverage shall be subject to disciplinary action. 2.23 Errors and Omissions Insurance Mortgage loan originators may obtain errors and omissions coverage from the qualified insurance carrier contracted with the Board of Mortgage Loan Originators to offer licensees and license applicants a group policy of insurance or licensees and applicants may obtain errors and omissions coverage independent of the group plan. Mortgage loan originators are deemed compliant with the errors and omissions insurance requirements if their errors and omissions insurance meets the requirements defined in one of the following options: A. Mortgage loan originators, at a minimum, may acquire and maintain individual errors and omissions insurance in their own name with the following terms of coverage: 1. The contract and policy are in conformance with all relevant Colorado statutory requirements; 2. Coverage includes all acts for which a mortgage loan originator license is required, except those illegal, fraudulent, or other acts which are normally excluded from such coverage; 3. Coverage shall encompass all types of transactions conducted by the mortgage loan originator and shall be in the individual mortgage loan originator’s name; 4. Coverage is for not less than $100,000 for each licensed individual per covered claim, with an annual aggregate limit of not less than $300,000 per licensed individual, not including costs of investigation and defense; and 5. Coverage contains a deductible no greater than $1,000, or a deductible no greater than $20,000 for policies that primarily insure reverse mortgage transactions. 6. Prior acts coverage shall be offered to licensees with continuous past coverage. B. Mortgage loan originators who are employees or exclusive agents for companies with less than 20 individuals who are required to be licensed pursuant to the current Colorado mortgage loan originator licensing laws and who do not work for more than one company, may, at a minimum, operate under the company’s errors and omissions insurance policy if the policy meets the following terms of coverage: 1. The contract and policy are in conformance with all relevant Colorado statutory requirements; 2. Coverage includes all acts for which a mortgage loan originator license is required, except those illegal, fraudulent, or other acts which are normally excluded from such coverage; 3. Coverage shall include all activities contemplated under current Colorado mortgage loan originator licensing laws and states this in the policy;

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Chapter 13: Mortgage Loan Originators 4. Coverage shall encompass all types of transactions conducted by all of the mortgage loan originators employed at the company or by all mortgage loan originators who are exclusive agents of the company; 5. Coverage is for not less than $1,000,000 per covered claim, with an annual aggregate limit of not less than $1,000,000, not including costs of investigation and defense; and 6. Coverage contains a deductible no greater than $50,000. 7. Prior acts coverage shall be offered to licensees with continuous past coverage. C. Mortgage loan originators who are W-2 employees or exclusive agents for companies with 20 or more employees and who do not work for more than one company, may, at a minimum, operate under the company’s errors and omissions insurance policy if the policy meets the following terms of coverage: 1. The contract and policy are in conformance with all relevant Colorado statutory requirements; 2. Coverage includes all acts for which a mortgage loan originator license is required, except those illegal, fraudulent, or other acts which are normally excluded from such coverage; 3. Coverage shall include all activities contemplated under current Colorado mortgage loan originator licensing laws and states this in the policy; 4. Coverage shall encompass all types of transactions conducted by all of the mortgage loan originators employed at the company or by all mortgage loan originators who are exclusive agents of the company; 5. Coverage shall encompass all types of transactions conducted by all of the mortgage loan originators employed at the company; 6. Coverage is for not less than $1,000,000 per covered claim, with an annual aggregate limit of not less than $2,000,000 not including costs of investigation and defense; and 7. Coverage contains a deductible no greater than $100,000. 8. Prior acts coverage shall be offered to licensees with continuous past coverage. 2.24 Regarding company errors and omissions insurance policies, the company shall provide the Board, or an authorized representative of the Board, with any and all requested errors and omissions insurance policies relevant to Rule 2.23 or current Colorado mortgage loan originator licensing laws and shall verify and provide adequate proof regarding the timeline of employment for each individual operating under such company policy. Failure on the part of the company to provide such information shall result in non-compliance regarding the errors and omissions insurance requirement for individual licensees operating under the company’s errors and omissions insurance policy. 2.25 Mortgage loan originators shall be required to provide proof of continuous errors and omissions insurance coverage and that all required information is current. The mortgage loan originator may update all required information electronically on the Division of Real Estate’s website. 2.26 Any licensee who so fails to obtain and maintain an errors and omissions insurance coverage in accordance with Board rules or fails to provide proof of continuous coverage shall be subject to disciplinary action. CHAPTER 3: CONTINUING EDUCATION REQUIREMENTS 3.1

The continuing education requirements for licensed individuals shall begin after issuance of the initial license. Individuals shall complete at least eight (8) hours of continuing education courses, which must include one (1) hour of Colorado specific education, reviewed and approved by the Nationwide Mortgage Licensing System and Registry or by a company 13-39

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3.2

3.3 3.4 3.5

contracted to review and approve continuing education courses. The Colorado specific education may replace what was a required general elective within the eight (8) hour continuing education course or may be completed as a standalone course. The continuing education requirements must be completed each calendar year and prior to license and registration renewals or reinstatements. Completion of the 20 hours of pre-licensing education approved by the Nationwide Mortgage Licensing System and Registry in the same year in which the license was approved, shall satisfy the continuing education requirements in that calendar year. REPEALED REPEALED Authority to audit education provider The Board or the Board’s designee may audit any Colorado specific education course reviewed and approved by the Nationwide Mortgage Licensing System and Registry or by a company contracted to review and approve continuing education courses. The Board or the Board’s designee may request from each education provider or schools offering such courses, all related instructional materials, student attendance records and other information that may be necessary for an audit. Failure to comply with this rule may result in the withdrawal of course approval.

CHAPTER 4: RENEWAL, REINSTATEMENT, INACTIVATION, SUSPENSION, SURRENDER OR REVOCATION OF A LICENSE OR REGISTRATION 4.1

Renewal process for active licensees. A. There are two existing databases that licensees shall independently renew their license through annually. The two independent databases include: 1. The license database managed by the Division of Real Estate. This database may be located by visiting the Division of Real Estate’s website. 2. The registration database managed by the Nationwide Mortgage Licensing System and Registry. B. Mortgage loan originators renewing, reinstating or re-applying for registration through the Nationwide Mortgage Licensing System and Registry shall do so in accordance with established timelines, policies and procedures set forth by the Nationwide Mortgage Licensing System and Registry. The Nationwide Mortgage Licensing System and Registry may collect fees for the purpose of registration applications, renewal applications, reinstatement applications, credit reports, criminal background checks and for other processes associated with registration through the Nationwide database. C. The Board shall issue or deny a license renewal or reinstatement application within thirty days after the applicant has submitted all of the information necessary for license renewal or reinstatement and after the Board has received all information necessary to make a determination regarding the applicants’ compliance. D. Regarding the license database managed by the Division of Real Estate, mortgage loan originators may renew or reinstate their license online or may do so by submitting a paper renewal or reinstatement application. E. For both databases, the license renewal period begins November 1st of each calendar year and ends December 31st of each calendar year. Individuals who renew their license shall only do so if they are compliant with all provisions of the mortgage loan originator licensing act and all Board Rules. F. All licenses expire at 12 midnight on December 31st of each calendar year if the licensee has not properly renewed their license.

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Chapter 13: Mortgage Loan Originators G.

4.2

4.3

If a license has expired, individuals may choose to reinstate their mortgage loan originator license. The reinstatement period for both databases begins January 1st of each calendar year and ends on the last day of February of each calendar year. Individuals who reinstate their license shall only do so if they are compliant with all provisions of the mortgage loan originator licensing act and all Board Rules. H. Individuals who fail to renew or reinstate their license shall re-apply in the manner set forth in Rule 4.3. I. All renewal, reinstatement or application fees shall be prescribed by the Board. All fees collected for the purpose of applying for license renewal, reinstatement or re-application are non-refundable. Renewal process for inactive licensees. A. Individuals with inactive licenses shall renew their license annually in the manner set forth in Rule 4.1. Individuals with inactive licenses are not required to maintain compliant errors and omissions insurance or a compliant surety bond, but they are required to stay current on all continuing education requirements in order to renew their license. B. The fee for reinstatement is one and one half times the amount of the current renewal fee. Re-application. A. Individuals who fail to maintain a valid license for a period of up to five (5) years after the date of license expiration and were compliant with the annual continuing education requirements at the time of license expiration will need to complete the following: 1. Register with the Nationwide Mortgage Licensing System and Registry in accordance with policies and procedures established by the Nationwide Mortgage Licensing System and Registry. This includes, but is not limited to completion of the correct registration application, authorization for the registry to pull a credit report and payment of any fees associated with registration; 2. Submit fingerprints to the Nationwide Mortgage Licensing System and Registry in accordance with policies and procedures established by the Nationwide Mortgage Licensing System and Registry; 3. Obtain a compliant surety bond. Surety bond requirements are defined in section 1261-907, C.R.S. and by Board Rule; 4. Obtain compliant errors and omissions insurance. Errors and omission insurance requirements are defined in Section 12-61-903.5, C.R.S. and by Board Rule; and 5. Complete the Colorado Division of Real Estate specific license application and pay the application fee. B. Individuals who fail to maintain a valid license for a period of up to five (5) years after the date of license expiration and who were not compliant with the annual continuing education requirements at the time of license expiration will need to complete the following: 1. Comply with all requirements set forth in section (a), subsection (1) to (5) of this Rule, and 2. Complete at least eight (8) hours of “late” continuing education courses, which must include one (1) hour of Colorado specific education, reviewed and approved by the Nationwide Mortgage Licensing System and Registry or by a company contracted to review and approve continuing education courses; C. Individuals who fail to maintain a valid license for a period of more than five (5) years after the date of license expiration will need to complete the following:

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4.4

4.5

4.6

1. Comply with all requirements set forth in section (b), subsection (1) and (2) of this Rule; and 2. Retake and successfully pass the S.A.F.E. Mortgage Loan Originator examination, developed by the Nationwide Mortgage Licensing System and Registry, consisting of two sections. These two sections include a national component and a Uniform State Test (UST) component. An individual shall pass the test in accordance with policies and procedures developed and administered by the Nationwide Mortgage Licensing System and Registry and in compliance with the S.A.F.E. Mortgage Licensing Act. Individuals who do not have an active license are prohibited from practicing as a mortgage loan originator. Additionally, individuals who do not have an active license are prohibited from engaging in any mortgage related activities which require licensure pursuant to the Colorado mortgage loan originator licensing and Mortgage Company Registration Act, Board rule or as prescribed by Board position statement. Renewal process for mortgage companies. A. Mortgage companies shall renew the registration on the Nationwide Mortgage Licensing System and Registry. B. Mortgage companies renewing, reinstating or re-applying for registration through the Nationwide Mortgage Licensing System and registry shall do so in accordance with established timelines, policies and procedures set forth by the Nationwide Mortgage Licensing System and Registry. The Nationwide Mortgage Licensing System and Registry may collect fees for the purpose of registration applications, renewal applications, reinstatement applications, credit reports, criminal background checks and for other processes associated with registration through the Nationwide database. C. The Board shall issue or deny a registration renewal application within thirty days after the applicant has submitted all of the information necessary for license renewal or reinstatement and after the board has received all information necessary to make a determination regarding the applicants’ compliance. D. The registration renewal period begins November 1st of each calendar year and ends December 31st of each calendar year. Mortgage companies that renew or reinstate their license shall only do so if they are compliant with all provisions of the mortgage loan originator licensing and mortgage company registration act and all Board rules. E. All registrations expire at 12 midnight on December 31st of each calendar year if the licensee has not properly renewed their license. F. If a license has expired, mortgage companies may choose to reinstate their registration. The reinstatement period for reinstatement begins January 1st of each calendar year and ends on the last day of February of each calendar year. Mortgage companies that reinstate their registration shall only do so if they are compliant with all provisions of the mortgage loan originator licensing and mortgage company registration act and all Board Rules. G. Mortgage companies that fail to renew or reinstate their registration shall re-apply on the Nationwide Mortgage Licensing System and Registry in order for the Division of Real Estate to review their applications and determine whether the mortgage company is compliant with the registration requirements. H. All renewal, reinstatement or application fees shall be prescribed by the Board and are non-refundable. Mortgage companies that do not have an approved registration are prohibited from acting through employees or other individuals who takes residential loan applications or offers or negotiates terms of a residential mortgage loan. Additionally, mortgage companies that do not have an approved registration are prohibited from engaging in any mortgage related conduct 13-42

Chapter 13: Mortgage Loan Originators that requires a registration pursuant to the mortgage loan originator licensing and mortgage company registration act, Board Rule or as prescribed by the Board by Position Statement. 4.7 Mortgage loan originator license inactivation and reactivation If a mortgage loan originator license or registration is inactivated by the Board of mortgage loan originators or an authorized representative of the Board for one or any combination of the following reasons, the mortgage loan originator shall pay an administrative fee determined by the board in order to reactivate their license: A. The mortgage loan originator has failed or is failing to comply with the surety bond requirements of section 12-61-903(6), C.R.S. Section 12-61-907, C.R.S. or any rule of the Board that directly or indirectly addresses surety bond requirements; B. The mortgage loan originator has failed or is failing to comply with the errors and omissions insurance requirement in Section 12-61-903.5, C.R.S. or any Rule of the Board that directly or indirectly addresses errors and omissions insurance requirements; C. The mortgage loan originator has failed or is failing to maintain current contact information, surety bond information, or errors and omissions insurance information as required by this Part 9 or by any Rule of the Board that directly or indirectly addresses such requirements; D. The mortgage loan originator has failed or is failing to respond to an investigation or examination; E. The mortgage loan originator has failed or is failing to comply with any of the education or testing requirements set forth in this Part 9 or in any rule of the Board that directly or indirectly addresses education or testing requirements; or F. The mortgage loan originator has failed or is failing to register with and provide all required information to the Nationwide Mortgage Licensing System and Registry. 4.8 Individuals who have an inactive license or registration are prohibited from practicing as a mortgage loan originator. Additionally, individuals who have an inactive license or registration are prohibited from engaging in any mortgage related activities which requires licensure pursuant to the Colorado mortgage loan originator licensing and mortgage company registration act, Board rule or as prescribed by Board position statement. 4.9 In order for an inactive mortgage loan originator license or registration to be reactivated, the individual seeking reactivation shall provide the Division of Real Estate with proof of full compliance with current mortgage loan originator license law. 4.10 The Board has created the mortgage loan originator license reactivation form and this form may be found on the Division of Real Estate’s website. CHAPTER 5: PROFESSIONAL STANDARDS 5.1

Advertising Any advertisement of a residential mortgage loan product or rate offered by a mortgage loan originator as that term is defined in § 12-61-902(6), C.R.S., or mortgage company as that term is defined in § 12-61-902(5), C.R.S., shall conform to the following requirements: A. An advertisement shall be made only for such products and terms as are actually available at the time they are offered and, if their availability is subject to any material requirements or limitations, the advertisement shall specify those requirements or limitations; B. The advertisement shall contain the following, each of which must be clearly and conspicuously included in the advertisement; 1. At least one (1) responsible party. The responsible party must be an individual person or a mortgage company. The responsible party must include their registration number 13-43

Colorado Real Estate Manual

5.2

5.3

5.4

that is approved on the Nationwide Mortgage Licensing System and Registry (NMLS); 2. The mortgage company name; and 3. The business phone number of the responsible party. C. The advertisement shall not appear to be offered by a government agency, a quasigovernment agency or the perspective borrower’s current lender and/or loan servicer; D. An advertisement shall not make or omit any statement the result of which would be to present a misleading or deceptive impression to consumers; E. An advertisement shall otherwise comply with all applicable state and federal disclosure requirements; F. Advertisements shall incorporate applicable provisions of the final Interagency Guidance on Nontraditional Mortgage Product Risks (“Interagency Guidance”) released on September 29, 2006, incorporated by reference in compliance with Section 24-4103(12.5), C.R.S., and does not include any later amendments or editions of the final guidance. A certified copy of the Interagency Guidance is readily available for public inspection at the offices of the Board of Mortgage Loan Originators at 1560 Broadway, Suite 925, Denver, Colorado. The Interagency Guidance released by the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Office of Thrift supervision, and the National Credit Union Administration can be examined at the internet website of the federal register (volume 71, number 192, page 58609-58618) at www.federalregister.gov. Reference copies of the federal register publications may also be found at the Colorado Supreme Court, located at 101 w. Colfax, Denver, Colorado 80202 or by telephone at (303) 837-3720; and G. The responsible party must retain copies of all advertisements for a period of four (4) years, and provide said copies for inspection by an authorized representative of the Board upon request. The requirements set forth in Rule 5.1(b), Subsections one (1) through three (3) shall not apply to: A. Any advertisement which indirectly promotes a credit transaction and which contains only the name of the mortgage company, the name and title of the mortgage loan originator, the contact information for the mortgage company or the mortgage loan originator, a mortgage company logo, or any license or registration numbers, such as the inscription on a coffee mug, pen, pencil, youth league jersey, sign, business card, or other promotional item; or B. Any rate sheet, pricing sheet, or similar proprietary information provided to real estate brokers, builders, and other commercial entities that is not intended for distribution to consumers. Loan Modifier Licensure A. Individuals, not otherwise exempt from Part 9, who directly or indirectly take residential loan modification applications or who negotiate, offer, or attempt to negotiate or offer loan modifications are required to be licensed as a Colorado Mortgage Loan Originator. B. All individuals required to be licensed shall comply with all other provisions of the Colorado Mortgage Loan Originator Licensing Act and all Board Rules. Required Use of a Loan Modification Contract A. Individuals taking loan modification applications or offering or negotiating loan modifications are required to use a loan modification contract which complies with the Mortgage Loan Originator Licensing Act and the Foreclosure Protection Act. 13-44

Chapter 13: Mortgage Loan Originators B.

5.5

5.6

5.7

The Board has created the Colorado Loan Modification Services Contract to ensure compliance with the aforementioned laws. This contract may be found on the Division of Real Estate’s website. Loan modifiers shall use this form or an alternate form, if such alternate form clearly includes all information required on the suggested form, as determined by the Board. C. The Colorado Loan Modification Services contract prescribed by this rule shall be completed at time of application. The Requirements Set Forth in Rules 5.3 and 5.4 Shall Not Apply to: A. Employees of HUD approved housing counseling agencies who are providing advice or general information on loan modifications in an ancillary manner relating to their general housing counseling services or duties. B. Employees of mortgage loan servicing companies operating on behalf of the borrowers’ mortgage lenders. C. Licensed Real Estate Brokers engaged in licensed activities when performing services within the defined short sale transactions do not need to maintain a license as a mortgage loan originator. If a real estate broker engages in the activities of providing loan modification services (those not included in the activities of short sales) as defined, loan modification services are defined as outside the scope of licensed real estate broker activities and therefore, separate licensure as a mortgage loan originator is required. D. An attorney, as set forth in Section 12-61-904(1)(d), C.R.S., who renders services in the course of practice, who is licensed in Colorado, and who is not primarily engaged in the business of negotiating residential mortgage loans or loan modifications is not required to be licensed as a mortgage loan originator, but is required to comply with all non-licensing provisions of current mortgage loan originator law set forth in Sections 12-61-901 through 12-61-915, C.R.S. Reasonable Inquiry A. A mortgage loan originator shall only recommend appropriate products after reasonable inquiry has been made in order to understand borrower’s current and prospective financial status. B. Reasonable inquiry requires the mortgage loan originator to interview and discuss current and prospective income, including the income’s source and likely continuance, with borrowers, and may not require the mortgage loan originator to verify such income. C. A mortgage loan originator has a duty to recommend mortgage products based on the information provided by the borrower. D. A mortgage loan originator shall be deemed in compliance with this rule and Colorado law, § 12-61-904.5(1)(b), C.R.S., concerning reasonable inquiry, upon interviewing and discussing, with all applicable borrowers, all sections contained in the uniform residential loan application and upon completion of a tangible net benefit disclosure. The tangible net benefit disclosure is posted on the Division of Real Estate’s website. Tangible Net Benefit The reasonable, Tangible Net Benefit Standard in § 12-61-904.5(1)(a), R.R.S., is inherently dependent upon the totality of facts and circumstances relating to a specific transaction. While the refinancing of certain home loans may clearly provide a reasonable, tangible net benefit, others may require closer scrutiny or consideration to determine whether a particular loan provides the requisite benefit to the borrower. A. When determining reasonable, tangible net benefit, there are many considerations a mortgage loan originator shall take into account and discuss with prospective borrowers. If applicable, the required considerations for a mortgage loan originator determining the requisite benefit shall include, but are not limited to: 13-45

Colorado Real Estate Manual

5.8

5.9

1. Lower payments; 2. Condensed amortization schedule; 3. Debt consolidation; 4. Cash out; 5. Avoiding foreclosure; 6. Negative amortization; 7. Balloon payments; 8. Variable rates; 9. Interest only options; 10. Prepayment penalties; and 11. Hybrid mortgage products. B. The purpose or reason for a purchase or refinance transaction shall be identified by the borrower. A mortgage loan originator shall require that all borrowers describe, in writing, the reasons they are seeking a mortgage loan, a loan modification or to refinance an existing mortgage loan. 1. It is the responsibility of the mortgage loan originator to ensure this information is acquired and accurately documented. 2. Pursuant to § 12-61-904.5(1), C.R.S., a mortgage loan originator may not have demonstrated a duty of good faith and fair dealing in all communications and transactions with a borrower if it is determined that a mortgage loan originator completed the required purpose or reason for a purchase, loan modification or refinance transaction without consulting the borrower. Tangible Net Benefit Disclosure Form The Board developed a disclosure form regarding reasonable, tangible net benefit. Alternate disclosures are acceptable if they include all information required on the suggested form, as determined by the Board. A. At the time of completing a loan application the mortgage loan originator shall complete a Tangible Net Benefit Disclosure with the borrower(s). B. The Tangible Net Benefit Disclosure shall also be completed with the borrower(s) prior to the borrower(s) signing loan closing documents if the reasonable, tangible net benefit has changed. C. Tangible Net Benefit Disclosures shall be signed by both the mortgage loan originator and the borrowers. D. A mortgage loan originator shall provide copies of completed disclosure forms to all borrowers within three (3) business days after receipt of a loan application or any moneys from a borrower. Furthermore, the mortgage loan originator must be able to provide proof to the Board or an authorized representative of the Board that the disclosure forms defined in this rule were in fact provided to the borrower within three (3) business days after receipt of a loan application, any moneys from a borrower or any subsequent changes to any loan terms requiring re-disclosure. Mortgage Loan Originator and Mortgage Company Duty to Respond and Provide Requested Documents for Investigations A. Persons required to be licensed or mortgage companies required to be registered pursuant to §§ 12-61-903 and 12-61-903.1, C.R.S., shall provide the Board or the Board’s representative with all information required by this rule. 1. Failure to provide all information requested by the Board or an authorized representative of the Board within a timeline established by the Board, or authorized 13-46

Chapter 13: Mortgage Loan Originators

B.

C.

D.

E.

representative of the Board, shall be grounds for disciplinary action and grounds for the imposition of fines unless the Board, or authorized representative of the Board, has granted an extension of time for the response. a. The mortgage loan originator and mortgage company may ask for an extension of time to comply if: i. The request is done so in writing; and ii. The request is received by the Board or authorized representative of the Board prior to the expiration date defined in the notification letter sent by the Board or authorized representative of the Board. b. Any and all extensions granted are done so at the discretion of the Board or an authorized representative of the Board. 2. Failure to provide all requested information shall be grounds for disciplinary action and grounds for the imposition of fines regardless of whether the underlying complaint results in further investigation or subsequent action by the Board. The response from the person shall contain the following: 1. If requested in the notification letter, the mortgage loan originator shall provide a complete and specific answer to the factual recitations, allegations or averments made in the complaint filed against the licensee, whether made by a member of the public or on the Board’s own motion or by an authorized representative of the Board; 2. The mortgage loan originator shall provide a complete and specific response to all questions, allegations or averments presented in the notification letter; and 3. Any and all documents or records requested in the notification letter. Mortgage companies shall maintain any and all documents collected, gathered and provided for the purpose of negotiating and originating residential mortgage loans for a period of four years. Additionally, mortgage companies shall maintain any and all documents used for the purpose of soliciting or marketing borrowers that were directed, made or caused to be made by the mortgage company. These documents include but are not limited to: 1. All uniform residential loan applications (form 1003); 2. All required state and federal disclosures; 3. Asset statements; 4. Income documentation; 5. Verification of employment; 6. Verification of deposit; 7. Lender submission forms; 8. Advertisements; 9. Flyers; 10. HUD-1 settlement statements; 11. Uniform underwriting and transmittal summary(form 1008); and 12. Credit report. The mortgage loan originator shall maintain any and all documents used for the purpose of soliciting or marketing borrowers that were directed, made or caused to be made by the mortgage loan originator. All documents required in this rule shall be kept in a safe and secure manner. Electronic storage is acceptable as long as the information is accessible and kept in a safe and secure manner. 13-47

Colorado Real Estate Manual 5.10 Mortgage Loan Originators Maintaining Current Contact Information and All Information Required for Licensing A. Individuals required to be licensed as a state licensed loan originator shall maintain all current contact information and all information required for licensing, in a manner acceptable to the Board, including on the Division of Real Estate database and on the Nationwide Mortgage Licensing System and Registry. Failure to maintain the information identified in this rule shall be grounds for disciplinary action. B. Contact information shall include, but is not limited to: 1. E-mail address; 2. Legal first, middle and last names; 3. Physical home address; 4. Home phone number; 5. Business address; 6. Business phone number; and 7. Business name. C. Information required for licensing includes, but is not limited to: 1. Surety bond company; 2. Surety bond number; 3. Surety bond effective date; 4. Errors and omissions insurance provider; 5. Errors and omissions policy number; 6. Errors and omissions effective and expiration date; and 7. Convictions, pleas of guilt or nolo contendere for all crimes. D. Individuals required to be licensed as a state licensed loan originator shall update the Board within thirty (30) days of any changes to the information defined in this rule on both the Division of Real Estate database and on the Nationwide Mortgage Licensing System and Registry. 5.11 Mortgage Loan Originator Contracts All contracts between a mortgage loan originator and a borrower shall be in writing and shall contain the entire agreement of the parties. Section 12-61-913(1), C.R.S. does not require a contract between a mortgage loan originator and a borrower. Rather, that if a contract does exist; such contract shall be in writing. 5.12 Mortgage Loan Originator Agreements A mortgage loan originator shall have a written correspondent or loan originator agreement with a lender before any solicitation of, or contracting with, any member of the public. A mortgage loan originator is compliant with this rule and § 12-61-913(2), C.R.S., if they adhere to one of the following requirements: A. They individually have a written correspondent or loan originator agreement with a lender before any solicitation of, or contracting with, any member of the public; B. They are an officer, partner, member, exclusive agent, or employee of a company that has a written correspondent or loan originator agreement with a lender before any solicitation of, or contracting with, any member of the public; C. They are acting as an independent contractor and maintain a contractual agreement with a company that has a written correspondent or loan originator agreement with a lender before any solicitation of, or contracting with, any member of the public; or

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Chapter 13: Mortgage Loan Originators D. 5.13

5.14

5.15 5.16 5.17

5.18 5.19 5.20 5.21

They are an employee of a lender before any solicitation of, or contracting with, any member of the public. Mortgage Loan Originator Disclosures Section 12-61-914(1), C.R.S., requires that specific disclosures, set forth in § 12-61-914(2), C.R.S., be disclosed within three (3) business days after receipt of a loan application. Fees, Costs, and Lock-in Disclosure requirements under Section 12-61-914 and Section 38-40102, C.R.S. A. Pursuant to the disclosure requirements set forth in Section 12-61-914, and Section 3840-102, C.R.S., mortgage loan originators must fully comply with all provisions of the TILA-RESPA Integrated Disclosure Rule, must disclose all fees and costs required in the TILA-RESPA Integrated Disclosure Rule, and must utilize the appropriate forms in the TILA-RESPA Integrated Disclosure Rule. Full compliance with the provisions of the TILA-RESPA Integrated Disclosure Rule satisfies the disclosure requirements set forth in Section 12-61-914, and Section 38-40-102, C.R.S. B. For any mortgage loan application or transaction that is exempt from the TILA-RESPA Integrated Disclosure Rule, mortgage loan originators must disclose the following: 1. The Truth-in-Lending Disclosure; 2. A form that itemizes the disclosure of all third-party fees and costs and must include a mortgage loan originator and borrower signature and dates in which the disclosure was completed and signed. (information commonly found in the pre-2010 HUD Good Faith Estimate Disclosure form); and 3. The Colorado Lock-in Disclosure. C. When applicable, the disclosures set forth in Rule 5.14(B) must be made within three (3) business days after receipt of a loan application, entering into a lock-in agreement, or if the annual percentage rate increases more than 1/8 of one (1) percentage point from an earlier disclosure. REPEALED REPEALED Compensation disclosure requirements as defined in Section 12-61-914(2)(c), C.R.S., must be disclosed pursuant to the MLO Compensation Rule. Full compliance with the provisions of the MLO Compensation Rule satisfies the disclosure requirements set forth in Section 12-61914(2)(c), C.R.S. REPEALED REPEALED REPEALED Individuals who originate a mortgage or act as a mortgage loan originator are required to keep records of the disclosures, set forth in 12-61-914(2), C.R.S., and these rules, for a period of five years, for the purposes of inspection by the Board or authorized representative of the Board. A. All documents shall be kept in a safe and secure manner. Electronic storage is acceptable as long as the information is accessible and kept in a safe and secure manner. B. The company for whom the mortgage loan originator is an officer, partner, contractor, independent contractor, member, exclusive agent or an employee may provide the requested documents to the Board. However, the mortgage loan originator is responsible for compliance with the Board’s request and is subject to disciplinary action if the company fails or refuses to provide the requested documentation. C. The mortgage loan originator must be able to provide proof to the Board or an authorized representative of the Board that the disclosure forms defined in this rule were in fact 13-49

Colorado Real Estate Manual provided to the borrower within three (3) business days after receipt of a loan application or any subsequent changes to any loan terms requiring re-disclosure. 5.22 Dual Status Disclosure The Board prohibits individuals from acting as a mortgage loan originator and a Real Estate Broker, on the same transaction, unless they comply with the requirements set forth in this rule. A. Dual status is a material fact to real estate transactions and shall be disclosed to the borrower(s). B. The Board has created the Colorado Dual Status Disclosure form to ensure this information is clearly and concisely disclosed. This disclosure may be found on the Division of Real Estate’s website. A mortgage loan originator shall use this form or an alternate form, if such alternate form clearly includes all information required on the suggested form, as determined by the Board. C. The Colorado Dual Status Disclosure form shall be completed, disclosed, and provided to the borrower within three (3) business days after receipt of a loan application. D. Persons who originate a mortgage, offer to originate a mortgage, act as a mortgage loan originator, or offer to act as a mortgage loan originator shall maintain the disclosure form defined by this rule for a period of five years. E. The mortgage loan originator must be able to provide proof to the Board or an authorized representative of the Board that the disclosure forms defined in this rule were in fact provided to the borrower within three (3) business days after receipt of a loan application or any subsequent changes to any loan terms requiring re-disclosure. CHAPTER 6: EXCEPTIONS AND BOARD REVIEW OF INITIAL DECISIONS 6.1

6.2

Written form, service, and filing requirements A. All designations of record, requests, exceptions and responsive pleadings (“pleadings”) must be in written form, mailed with a certificate of mailing to the Board. B. All pleadings must be received by the Board by 5:00 p.m. On the date the filing is due. A pleading is considered filed upon receipt by the Board. These rules do not provide for any additional time for service by mail. C. Any pleadings must be served on the opposing party by mail or by hand delivery on the date which the pleading is filed with the Board. D. All pleadings must be filed with the Board and not with the Office of Administrative Courts. Any designations of record, requests, exceptions or responsive pleadings filed in error with the Office of Administrative Courts will not be considered. The Board’s address is: Colorado Board of Mortgage Loan Originators 1560 Broadway, Suite 925 Denver, Colorado 80202 Authority to review A. The Board hereby preserves the Board’s option to initiate a review of an initial decision on its own motion pursuant to § 24-4-105(14)(a)(ii) and (b)(iii), C.R.S. outside of the thirty day period after service of the initial decision upon the parties without requiring a vote for each case. B. This option to review shall apply regardless of whether a party files exceptions to the initial decision.

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Chapter 13: Mortgage Loan Originators 6.3

Designation of record and transcripts A. Any party seeking to reverse or modify the initial decision of the administrative law judge shall file with the Board a designation of the relevant parts of the record for review (“designation of record”). Designations of record must be filed with the Board within twenty days of the date on which the Board mails the initial decision to the parties’ address of record with the Board. B. Within ten days after a party’s designation of record is due, any other party may file a supplemental designation of record requesting inclusion of additional parts of the record. C. Even if no party files a designation of record, the record shall include the following: 1. All pleadings; 2. All applications presented or considered during the hearing; 3. All documentary or other exhibits admitted into evidence; 4. All documentary or other exhibits presented or considered during the hearing; 5. All matters officially noticed; 6. Any findings of fact and conclusions of law proposed by any party; and 7. Any written brief filed. D. Transcripts: transcripts will not be deemed part of a designation of record unless specifically identified and ordered. Should a party wish to designate a transcript or portion thereof, the following procedures will apply: 1. The designation of record must identify with specificity the transcript or portion thereof to be transcribed. For example, a party may designate the entire transcript, or may identify witness(es) whose testimony is to be transcribed, the legal ruling or argument to be transcribed, or other information necessary to identify a portion of the transcript. 2. Any party who includes a transcript or a portion thereof as part of the designation of record must order the transcript or relevant portions by the date on which the designation of record must be filed (within twenty days of the date on which the Board mails the initial decision to the parties). 3. When ordering the transcript, the party shall request a court reporter or transcribing service to prepare the transcript within thirty days. The party shall timely pay the necessary fees to obtain and file with the Board an original transcription and one copy within thirty days. 4. The party ordering the transcript shall direct the court report or transcribing service to complete and file with the Board the transcript and one copy of the transcript within thirty days. 5. If a party designates a portion of the transcript, the opposing party may also file a supplemental designation of record, in which the opposing party may designate additional portions of the transcript. 6. An opposing party filing a supplemental designation of record designating additional portions of the transcript must order and pay for such transcripts or portions thereof within the deadlines set forth above. An opposing party must also cause the court reporter to complete and file with the Board the transcript and one copy of the transcript within thirty days. 7. Transcripts that are ordered and not filed with the Board in a timely manner by the reporter or the transcription service due to non-payment, insufficient payment or failure to direct as set forth above will not be considered by the Board.

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Colorado Real Estate Manual 6.4

6.5

Filing of exceptions and responsive pleadings A. Any party wishing to file exceptions shall adhere to the following timelines: 1. If no transcripts are ordered, exceptions are due within thirty days from the date on which the Board mails the initial decision to the parties. Both parties’ exceptions are due on the same date. 2. If transcripts are ordered by either party, the following procedure shall apply. Upon receipt of all transcripts identified in all designations of record and supplemental designations of record, the Board shall mail notification to the parties stating that the transcripts have been received by the Board. Exceptions are due within thirty days from the date on which such notification is mailed. Both parties’ exceptions are due on the same date. B. Either party may file a responsive pleading to the other party’s exceptions. All responsive pleadings shall be filed within ten days of the date on which the exceptions were filed with the Board. No other pleadings will be considered except for good cause shown. C. The Board may in its sole discretion grant an extension of time to file exceptions or responsive pleadings, or may delegate the discretion to grant such an extension of time to the Board’s designee. Request for oral argument A. All requests for oral argument must be in writing and filed by the deadline for responsive pleadings. B. It is within the sole discretion of the Board to grant or deny a request for oral argument. If oral argument is granted, both parties shall have the opportunity to participate. C. If a request for oral argument is granted, each side shall be permitted ten minutes of oral argument unless such time is extended by the Board or its designee.

CHAPTER 7: DECLARATORY ORDERS PURSUANT TO SECTION 24-4-105(11), C.R.S. 7.1

7.2

7.3

Any person may petition the Board for a declaratory order to terminate controversies or to remove uncertainties as to the applicability to the Petitioner of any statutory provisions or of any rule or order of the Board. The Board will determine, in its discretion and without prior notice to Petitioner, whether to entertain any such petition. If the Board decides that it will not entertain such a petition, the Board shall promptly notify the Petitioner in writing of its decision and the reasons for that decision. A copy of the order shall be provided to the Petitioner. In determining whether to entertain a petition filed pursuant to this rule, the Board may consider the following matters, among others: A. Whether a ruling on the petition will terminate a controversy or remove uncertainties as to the applicability to Petitioner of any statutory provision or rule or order of the Board. B. Whether the petition involves any subject, question or issue which is the subject of a formal or informal matter or investigation currently pending before the Board or a court involving one or more of the Petitioners. C. Whether the petition involves any subject, question or issue which is the subject of a formal or informal matter or investigation currently pending before the Board or a court but not involving any Petitioner. D. Whether the petition seeks a ruling on a moot or hypothetical question or will result in an advisory ruling or opinion. E. Whether the Petitioner has some other adequate legal remedy, other than an action for declaratory relief pursuant to Rule 57, C.R.C.P., which will terminate the controversy or 13-52

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7.4

7.5

7.6

7.7

remove any uncertainty as to the applicability to the Petitioner of the statute, rule or order in question. Any petition filed pursuant to this rule shall set forth the following: A. The name and address of the Petitioner and whether the Petitioner holds a license or registration issued pursuant to Section 12-61-901 et. Seq. C.R.S. (as amended). B. The statute, rule or order to which the petition relates. C. A concise statement of all of the facts necessary to show the nature of the controversy or uncertainty and the manner in which the statute, rule or order in question applies or potentially applies to the Petitioner. D. A concise statement of the legal authorities if any, and such other reasons upon which the Petitioner relies. E. A concise statement of the declaratory order sought by the Petitioner. If the Board determines that it will rule on the petition, the following procedures shall apply: A. The Board may rule upon the petition without a hearing. In such case: 1. The Board may dispose of the petition on the sole basis of the matters set forth in the petition. 2. The Board may request the Petitioner to submit additional facts in writing. In such event, such additional facts will be considered as an amendment to the petition. 3. Any ruling of the Board will apply only to the extent of the facts presented in the petition and any amendment to the petition. 4. The Board may order the Petitioner to file a written brief, memorandum or statement of position based on the facts set forth in the petition and any amendment to the petition. 5. The Board may take administrative notice of facts pursuant to The Administrative Procedures Act, Section 24-4-105(8), C.R.S. (as amended), and may utilize its experience, technical competence and specialized knowledge in the disposition of the petition. 6. If the Board rules upon the petition without hearing, it shall promptly notify the Petitioner in writing of its decision. B. The Board may, in its discretion, set the petition for hearing, upon due notice to Petitioner, for the purpose of obtaining additional facts or information or to determine the truth of any facts set forth in the petition or to hear oral argument on the petition. The notice to the Petitioner setting such hearing shall set forth, to the extent known, the factual or other matters into which the Board intends to inquire and whether the hearing will be evidentiary or non-evidentiary in nature. For the purpose of such a hearing, to the extent necessary, the Petitioner shall have the burden of proving all of the facts stated in the petition, all of the facts necessary to show the nature of the controversy or uncertainty and the manner in which the statute, rule or order in question applies or potentially applies to the Petitioner and any other facts the Petitioner desires the Board to consider. The parties to any proceeding pursuant to this rule shall be the Board and the Petitioner. Any other person may seek leave of the Board to intervene in such a proceeding, and leave to intervene shall be granted at the sole discretion of the Board. A petition to intervene shall set forth the same matters as required by section 7.4 of this rule. Any reference to a “Petitioner” in this rule also refers to any person who has been granted leave to intervene by the Board. Any declaratory order or other order disposing of a petition pursuant to this rule shall constitute agency action subject to judicial review pursuant to Section 24-4-106, C.R.S. (as amended).

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Colorado Real Estate Manual CHAPTER 8: NATIONWIDE MORTGAGE LICENSING SYSTEM AND REGISTRY (“NMLS”) 8.1

8.2 8.3

8.4

8.5

8.6

A mortgage loan originator may challenge information entered into the NMLS by the Division. Such challenge must be in writing and must set forth the specific information being challenge and include supporting evidence. The grounds for a challenge shall be limited to the factual accuracy of the information pertaining to the mortgage loan originator’s own license record. A challenge submitted to appeal the underlying grounds for a disciplinary action will not be considered by the Director. The Director, or an authorized representative of the Director, will review all information submitted by the mortgage loan originator and will determine the merits of the challenge. If the Director, or the Director’s authorized representative, determines that the information submitted to the NMLS by the Division is factually incorrect, the Division will promptly submit the correct information to the NMLS. A mortgage loan originator may appeal the Director’s, or the Director’s authorized representative’s, decision regarding the challenge to the Board of Mortgage Loan Originators within 30 days of the decision being rendered. The decision of the Board regarding a NMLS challenge is subject to judicial review by the court of appeals by appropriate proceedings under Section 24-4-106(11), C.R.S. Call Reports All mortgage companies must submit the NMLS Mortgage Call Report on a calendar quarterly basis, as set forth below, and shall contain such information as the NMLS may require. A. A mortgage company must identify the applicable NMLS Mortgage Call Report. This includes, but is not limited to, the standard section and the expanded section of the NMLS Mortgage Call Report. The mortgage company must identify and complete the report on behalf of all employed mortgage loan originators or other mortgage loan originators that operate through their company. B. The quarterly report is due within 45 days of the end of the quarter and the financial condition report of the standard section is due annually 90 days from the company’s fiscal year end. C. Mortgage companies must comply with any rules, policies and procedures relating to the submission of a Mortgage Call Report that are prescribed by the NMLS. Failure to properly submit a NMLS Mortgage Call report in a timely manner prescribed by the NMLS shall prevent the mortgage company from renewing their NMLS registration.

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[REPEALED effective 1/14/2014]

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[REPEALED effective 1/14/2014]

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[REPEALED effective 1/14/2014]

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[REPEALED effective 1/14/2014]

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[REPEALED effective 1/14/2014]

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[REPEALED effective 1/14/2014]

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[REPEALED effective 1/14/2014]

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[REPEALED effective 1/10/2014]

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Chapter 13: Mortgage Loan Originators

VI. Position Statements Position Statement – MB 1.1 [Repealed] Position Statement – MB 1.2 [Repealed] Position Statement – MLO 1.3 – Board Position on Individuals Not Required to be Licensed – Supervisors and Support Staff (revised 09/18/2013) – effective 11/14/2013 The Board of Mortgage Loan Originators (“Board”) issues this position statement to provide clarification to the mortgage industry regarding when supervisors and support staff of mortgage loan originators are not required to be licensed.

Supervision of Licensed Individuals: Persons who directly or indirectly supervise mortgage loan originators, defined as those individuals who either take residential loan applications or offer or negotiate terms of a residential mortgage loan, are not required to hold a license if their duties are purely administrative in nature. Administrative tasks include, but are not limited to: setting goals and objectives, overseeing production, delegating duties, and evaluating performance, as long as performance of these tasks does not amount to the taking of a residential mortgage loan application or offering or negotiating the terms of a residential mortgage loan.

Support Staff: Individuals who perform purely clerical and support tasks under the direction and supervision of a state licensed individual do not fall within the definitions of “originate a mortgage” or “mortgage loan originator.” Clerical or support tasks include, but are not limited to: a. Communicating with a consumer to obtain the information necessary for the processing or underwriting of a loan, to the extent that such communication does not include offering or negotiating loan rates or terms, or counseling consumers about residential mortgage loan rates or terms; and b. The receipt, collection, distribution and analysis of information common for the processing or underwriting of a residential mortgage loan. However, at any time, if the unlicensed persons activities fall outside of administrative, clerical or support in nature and within the definitions of “originate a mortgage” as defined in section 12-61902(7), C.R.S., or “mortgage loan originator” as defined in section 12-61-902(6)(a), C.R.S., they are required to be licensed as a Colorado mortgage loan originator.

Position Statement – MLO 1.4 – Mortgage Loan Originator and Mortgage Company Exemptions (revised 09/18/2013) The Board of Mortgage Loan Originators has reissued this position statement to provide guidance for all individuals and entities identified under the exemption portion of the Mortgage Loan Originator Licensing and Mortgage Company Registration Act (the “Act”); specifically section 12-61-904, C.R.S., and federal regulations regarding seller financing.

State specific exemption for real estate brokers: The Colorado General Assembly passed two bills in 2013 concerning the regulation of mortgage loan originators with new language affecting the exemption portion of the Act. Section 12-61-904, C.R.S., defines all individuals and entities that are exempt or otherwise excused from complying with licensure and registration standards outlined by the Act. 13-55

Colorado Real Estate Manual The first bill, SB 13-118, added exemption language for real estate brokers representing persons providing seller financing for the sale of no more than three residential properties in any twelve month period. Section 12-61-904 (1)(l), C.R.S., now includes as exempt: “A person licensed under part 1 of this article who represents a person, estate, or trust providing mortgage financing under paragraph (b) of the subsection (1).” The Board finds it necessary to clarify in what capacity one is acting when representing a person, estate, or trust that is offering seller financing. The Board has taken the position that “represents” denotes in the capacity of a real estate broker as set forth in section 12-61-101(2)(a), C.R.S. As such, persons licensed under part 1 are limited to the real estate brokerage activities as defined in section 12-61-902(7.7), C.R.S. “Acting in the capacity of a real estate broker” does not include the offering or negotiation of terms and conditions of any proposed financing arrangements with the seller. That activity would fall under the purview of mortgage origination. Additionally, the sunset bill for the mortgage loan originators program, SB 13-156, deleted subsection (m) of 12-61-911(1), C.R.S., thereby removing any uncertainties as to the plain and straightforward intent to exempt all individuals and entities identified in sections 12-61-904(1)(c) through (k) and (l), C.R.S., from all sections, provisions, and requirements of the Act.

Compliance with federal requirements: There have been some questions with regard to SB13-118, and how the new exemption created for licensed real estate brokers reconciles with federal licensure requirements. The Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (“S.A.F.E. Act”) sets minimum national licensing standards for mortgage loan originators and requires that all mortgage loan originators be registered on the National Mortgage Licensing System and Registry (“NMLS”). The SAFE Act defines “loan originator” as an individual who (I) takes a residential mortgage loan application; and (II) offers or negotiates terms of a residential mortgage loan for compensation or gain. This regulation also describes activities in the residential mortgage process that are excluded from the definition of “loan originator.” Activities that are excluded include: those that pertain to administrative or clerical tasks; real estate brokerage activities by individuals licensed or registered by a state to undertake real estate brokerage activities, unless that person is compensated by a loan originator, loan processing or underwriting under the direction and supervision of a state-licensed loan originator or registered loan originator; and those individuals solely involved in extensions of credit relating to timeshare plans. Care should be taken by anyone licensed under part 1 as not to perform any acts that may require licensure under federal licensing requirements.

Position Statement – MLO 1.5 – Loan Modifications (revised 11/20/2013) Short sale – A short sale is the sale of a real property for less than the mortgage loan balance. In the settlement of the short sale transaction the existing mortgage is extinguished. Any deficiency created from the settlement of the transaction may be transformed into a promissory note, charged off, forgiven, or pursued as a judgment against the previous owner. Loan modification – A Loan Modification is a permanent change in one or more of the terms of a mortgagor's existing loan, allows the loan to be reinstated, and often results in a more affordable mortgage payment. The borrower retains ownership of the real property and the mortgage note and deed of trust remain intact. 1. Section 12-61-902(7), C.R.S. defines originate a mortgage as to act directly or indirectly as a mortgage loan originator. It is the Board’s position that individuals offering or negotiating loan modifications are, at a minimum, indirectly acting as mortgage loan originators. Pursuant to section 12-61-903(1)(a), Colorado Revised Statutes, all persons who meet the definition of originate a mortgage are required to be licensed. As a result, persons who directly or indirectly negotiate, originate or offer or attempt to negotiate or originate loan 13-56

Chapter 13: Mortgage Loan Originators

2.

3.

4. 5.

6.

7.

modifications are currently required to be licensed as mortgage loan originators and are required to be licensed as state-licensed loan originators by July 31, 2010. In addition to the licensing requirements, all individuals who directly or indirectly negotiate loan modifications for borrowers are required to comply with all other provisions of Colorado mortgage loan originator licensing law and Board rules. This includes, but is not limited to: a. A duty of good faith and fair dealing in all communications and transactions with borrowers; b. A prohibition against making any promise that influences, persuades, or induces another person to detrimentally rely on such promise when the licensee could not or did not intend to keep such promise; c. A prohibition against soliciting or entering into a contract with a borrower that provides in substance that the mortgage loan originator may earn a fee or commission through the mortgage loan originator’s “best efforts” to obtain a loan even though no loan is actually obtained for the borrower; and d. If the mortgage loan originator has obtained for the borrower a written commitment from a lender for a loan on the terms and conditions agreed to by the borrower and the mortgage loan originator, and the borrower fails to close on the loan through no fault of the mortgage loan originator, the mortgage loan originator may charge a fee, not to exceed three hundred dollars, for services rendered, preparation of documents, or transfer of documents in the borrower’s file that were prepared or paid for by the borrower if the fee is not otherwise prohibited by the federal “Truth in Lending Act”, 15 U.S.C. section 1601, and Regulation Z, 12 CFR 226, as amended. The Board’s position on this matter shall not be construed to include employees of non-profit HUD-approved housing counseling agencies as long as such individuals receive neither compensation nor anything of value for participation in loan modifications. The Board’s position on this matter shall not be construed to include employees of mortgage loan servicing companies operating on behalf of mortgage lenders. Licensed Real Estate Brokers engaged in licensed activities when performing services within the defined short sale transactions do not need to maintain a license as a mortgage loan originator. However, loan modification services as defined in this position statement are considered outside the scope of real estate brokerage activities and as such, separate licensure as a mortgage loan originator is required. As set forth in section 12-61-904(1)(d), C.R.S., an attorney who renders services in the course of practice, who is licensed in Colorado, and who is not primarily engaged in the business of negotiating residential mortgage loans or loan modifications is not required to be licensed as a mortgage loan originator. Noncompliance may result in the imposition of any of the sanctions allowable under Colorado law, including, but not limited to: a. Imposition of fines; b. Restitution for any financial loss; c. Refusal to renew a license; d. Refusal to grant a license; and e. Revocation.

Position Statement – MLO 1.7 – Financial Responsibility Requirement The Board’s position on this matter is there is a presumption of compliance with the financial responsibility requirement in section 12-61-905(1)(j), C.R.S. for individuals required to be licensed as state-licensed loan originators who have complied with the errors and omissions insurance 13-57

Colorado Real Estate Manual requirements defined in section 12-61-903.5, C.R.S. and any Director rule that directly or indirectly addresses errors and omissions insurance requirements and who have complied with the surety bond requirements defined in sections 12-61-903(6) and 12-61-907, C.R.S. and any Board rule that directly or indirectly addresses surety bond requirements.

Position Statement – MLO 1.8 – Real Estate Brokerage Activity The Board is aware that pursuant to the real estate brokers licensing act, specifically § 12-61-801, C.R.S. et seq., licensed Colorado real estate brokers are required to fulfill specific duties and obligations. Many of the duties prescribed by the act address financial matters involved in the contract for a real property transaction. Whether acting as a single agent or a transaction broker, a real estate broker must exercise reasonable skill and care, including but not limited to: 1) accounting for all money and property received in a timely manner; 2) keeping the parties fully informed of the transaction; 3) assisting the parties in complying with the terms and conditions of any contract including closing the transaction; and 4) making disclosures regarding adverse material facts pertaining to a principal’s financial ability to perform the terms of the transaction and the buyer’s intent to occupy the property as a principal residence. Without the informed consent of all parties, a transaction broker is prohibited from disclosing that a seller or buyer will agree to financing terms other than those offered. A single agent is prohibited from disclosing whether his or her client(s) will agree to financing terms other than those offered, unless the client consents. The Board is also cognizant that real estate brokers advise on fees relating to homeowner’s associations, special assessments, appraisals, surveys, inspections, property insurance, and taxes. Pursuant to § 12-61-902(7.7)(c), C.R.S., the aforementioned activities could be construed as requiring a mortgage loan originator’s license since they involve “matters related to financing for the transaction” at the time of contract negotiation. However, the Board has determined these activities are exempt from the mortgage loan originator’s licensing act. Specifically, § 12-61-902(6)(a), C.R.S. defines a mortgage loan originator as an individual who “takes a residential loan application” or “offers or negotiates terms of a residential mortgage loan.” Real estate brokers engaging in these activities are required to be licensed as a mortgage loan originator.

Position Statement – MLO 1.9 – Mortgage Company Definition Applicability The Board of mortgage loan originators views the definition of a mortgage company, pursuant to their interpretation of Colorado law, to exclude the following entities: 1. Persons, other than an individual, who meet all of the following requirements: a. Funds a residential mortgage loan when the residential mortgage loan application was taken by a licensed or exempt person; b. Does not take residential mortgage loan applications or does not offer or negotiate terms of a residential mortgage loan; c. Does not solicit borrowers in Colorado for the purpose of making residential mortgage loans; and d. Does not participate in the offering or negotiation of residential mortgage loans with the borrower, except for setting the terms under which a person may buy or fund a residential mortgage loan originated by a licensed person; 2. Private mortgage insurance companies that provide contract underwriting services to the lending community; or 3. Lead generating companies that do not, through employees or other individuals, take residential mortgage loan applications or offer or negotiate terms of a residential mortgage loan to prospective borrowers. 13-58

Chapter 13: Mortgage Loan Originators The types of entities described in this position statement are determined to be excluded from the definition of a mortgage company and, therefore, are not required to register as Mortgage Companies with the Colorado Board of Mortgage Loan Originators.

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