4 CCR 725-3
DEPARTMENT OF REGULATORY AGENCIES Division of Real Estate RULES REGARDING MORTGAGE BROKERS 4 CCR 725-3 [Editor’s Notes follow the text of the rules at the end of this CCR Document.] 1-1-1 CONCERNING GOOD-FAITH TEMPORARY REGISTRATION FOR MORTGAGE BROKERS. [Eff. 09/30/2007] Section 3. Applicability Section 4. Definitions Section 5. Rules Regarding Registration Section 1 Authority This regulation is promulgated by the Director of the Division of Real Estate under the authority of § 12- 61-910.3, C.R.S., (2007).
Section 2 Scope and Purpose The purpose of this regulation is to specify the requirements of a good-faith temporary registration. Section 3 Applicability This rule governs individuals who broker a mortgage or act as a mortgage broker and is not intended for individuals who remain exempt from registration pursuant to § 12-61-904, C.R.S. (2007). Section 4 Definitions A. “Good-Faith Effort” is defined as complying with the provisions as set forth below in this rule. Section 5. Rules Regarding Registration 1. Mortgage brokers demonstrating to the Director a good-faith effort to comply with newly enacted HB07-1322, § 12-61-901, et seq. , C.R.S. shall be issued a Good-Faith Temporary Registration upon compliance with the requirements set forth below.
2. Good-Faith Temporary registrations will expire upon determination by the Director that the requirements of the law have not been met. Applicants shall be notified via e-mail, fax or U.S. mail to the contact information provided to the Division of Real Estate in the applicant’s application.
3. Good-Faith Temporary registrations issued by the Director will remain in effect until December 31, 2007, unless the Director issues the applicant a full registration upon the applicant’s compliance with all terms of the applicable registration law, or unless the Director determines the registration to be expired for failure to comply with the requirements to obtain a Good Faith Temporary Registration, as set forth in this regulation.
4. Any temporary registration issued by the Director shall have the same force and effect of the registration required by § 12-61-901, et seq. , for the period of time it is in effect.
5. Once the applicant fully complies with the terms of the new law as determined by the Director, the Director shall register the applicant in accordance with § 12-61-903, C.R.S. The date this occurs will be the applicant’s anniversary date for purposes of compliance with the licensing and education requirements of § 12-61-903, C.R.S.
1-1-2 MORTGAGE LOAN ORIGINATOR TEMPORARY LICENSE Pursuant to and in compliance with Title 12, Article 61 and Title 24, Article 4, C.R.S. as amended, notice of proposed rulemaking is hereby given, including notice to the Attorney General of the State of Colorado, and to all persons who have requested to be advised of the intention of the Director of the Colorado Division of Real Estate to promulgate rules.
Section 3. Applicability Section 4. 1-1-2 Mortgage Loan Originator Temporary License Section 5. Effective Date The statutory basis for this rule, entitled Mortgage Loan Originator Temporary License, is § 12-61- 910.3, C.R.S.
The notice proposes to update rule 1-1-2. The rule establishes a temporary license for mortgage loan originators.
Section 12-61-905(10), C.R.S. requires the Director of the Division of Real Estate to promulgate rules that allow licensed mortgage loan originators to hire unlicensed mortgage loan originators under temporary licenses. The purpose of this regulation is to define the parameters under which an individual may receive a temporary license.
Section 3. Applicability This rule applies to mortgage loan originators as that term is defined in § 12-61-902(6), C.R.S. and includes those 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. This rule applies to all individuals required to be licensed pursuant to § § 12-61-902 and 12-61-903, C.R.S. Section 4. 1-1-2 Mortgage Loan Originator Temporary License 1. Mortgage loan originators demonstrating to the Director 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.
2. Only individuals who hold and maintain a mortgage broker or mortgage loan originator license may hire and sponsor unlicensed mortgage brokers or mortgage loan originators under the temporary license provision.
3. 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 broker or licensed mortgage loan originator with whom the temporary licensee is operating under.
4. Individuals seeking temporary licenses shall be granted one temporary license. Additional or extended temporary licenses shall be prohibited.
5. Individuals seeking a temporary license shall complete the paper version of the mortgage broker or mortgage loan originator license application posted on the Division of Real Estate’s website at http://www.dora.state.co.us/real-estate/mortgage/MBForms.htm.
6. Temporary licensees shall request on the application that the Director inactivate their temporary license upon determination by the Director that the requirements of the law have not been met. Applicants shall be notified via e- mail, fax or U.S. mail to the contact information provided to the Division of Real Estate in the applicant’s mortgage loan originator license application.
7. Any temporary license issued by the Director 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.
8. Once the applicant fully complies with the terms of the law as determined by the Director, the Director shall license the applicant in accordance with § 12-61-903, C.R.S.
9. Due to the changes defined in this rule, the names of temporary licensees will be posted to the Division of Real Estate website at http://www.dora.state.co.us/real- estate/mortgagebrokerregistration.htm.
Section 5. Effective Date This permanent rule shall be effective August 6, 2009.
1-1-4 MORTGAGE LOAN ORIGINATOR LICENSE RENEWAL, REINSTATEMENT AND RE- APPLICATION Pursuant to and in compliance with Title 12, Article 61 and Title 24, Article 4, C.R.S. as amended, notice of proposed rulemaking is hereby given, including notice to the Attorney General of the State of Colorado, and to all persons who have requested to be advised of the intention of the Director of the Colorado Division of Real Estate to promulgate rules.
Section 3. Applicability Section 4. 1-1-4 Mortgage Loan Originator License Renewal, Reinstatement and Re-Application The statutory basis for this rule, entitled 1-1-4 Mortgage Loan Originator License Renewal, Reinstatement and Re-Application, is § 12-61-910.3, C.R.S. The notice proposes to add rule 1-1-4. The rule defines the license renewal process for mortgage loan originators.
Due to the three year license cycle that has been in place, there has been no need to date to define the renewal process. As a result of the S.A.F.E. Act and subsequent passage of House Bill 09-1085, the license cycle has been changed from a three year cycle to an annual cycle. As a result, mortgage loan originators must renew their licenses annually. Additionally, licensees are now required to be registered with the Nationwide Mortgage Licensing System and Registry. The Director of the Division of Real Estate has determined that it is most appropriate to mimic timelines and processes associated with the Nationwide Mortgage Licensing System and Registry. Failing to do so would cause tremendous confusion on the part of the licensee pool.
The purpose of this rule is to clearly define the transition from a three year license cycle to an annual license cycle and to define the license renewal process. Section 3. Applicability This rule applies to mortgage loan originators as that term is defined in § 12-61-902(6), C.R.S. and includes those 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. This rule applies to all individuals required to be licensed pursuant to § § 12-61-902 and 12-61-903, C.R.S. Section 4. 1-1-4 Mortgage Loan Originator License Renewal, Reinstatement and Re-Application.
1. Transitioning from a three year license cycle to an annual license cycle.
2. Renewal Process for active licensees.
3. Renewal Process for inactive licensees.
4. Renewal, reinstatement or re-application fees.
5. Re-application.
6. 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 Act, Director rule or as prescribed by Director position statement.
1-1-5 PRELIMINARY ADVISORY OPINIONS Pursuant to and in compliance with Title 12, Article 61 and Title 24, Article 4, C.R.S. as amended, notice of proposed rulemaking is hereby given, including notice to the Attorney General of the State of Colorado, and to all persons who have requested to be advised of the intention of the Director of the Colorado Division of Real Estate to promulgate rules.
Section 3. Applicability Section 4. 1-1-5 Preliminary Advisory Opinions The statutory basis for this rule, entitled 1-1-5 Preliminary Advisory Opinions , is § 12-61-910.3, C.R.S.
The notice proposes to add rule 1-1-5. The rule establishes a preliminary advisory opinion process for individuals concerned about how existing license laws may apply to their circumstances. In 2006, Colorado was one of two states, the other being Alaska, that had no regulatory oversight regarding mortgage brokers. In 2006, the Colorado General Assembly acted and passed House Bill 06- 1161. In 2007, due to the state of the real estate market and the foreclosure crisis, the Colorado General Assembly enacted and passed House Bill 07-1322, Senate Bill 07-216, Senate Bill 07-085, and Senate Bill 07-203. In 2008, Congress passed the Housing and Economic Recovery Act of 2008. The Housing and Economic Recovery Act of 2008 contained the S.A.F.E. Act, which established minimum national licensing standards for mortgage loan originators and mandated states to adopt such provisions. As a result, in 2009 the Colorado General Assembly acted and passed House Bill 09-1085 to ensure compliance with the S.A.F.E. Act.
While Colorado was one of the last states to establish regulatory oversight of mortgage brokers, the registration and licensing laws have seen significant changes. The investment of time, energy and resources have increased with each passing bill. As a result, the purpose of this rule is to define a preliminary advisory process where potential applicants may have their specific circumstances reviewed by the Director or an authorized representative of the Director and be provided an opinion regarding whether or not they are likely to receive a license approval or a license denial. In doing so, potential applicants will be able to receive guidance prior to acquiring and paying for the requisite errors and omissions insurance, surety bond, finger prints for submission, completion of required educational courses and passage of the appropriate test. The purpose of this preliminary advisory rule is to define a preliminary advisory opinion process for prospective licensees. Section 3. Applicability This rule applies to mortgage loan originators as that term is defined in § 12-61-902(6), C.R.S. and includes those 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. This rule applies to all individuals required to be licensed pursuant to § § 12-61-902 and 12-61-903, C.R.S. Section 4. 1-1-5 Preliminary Advisory Opinions 1. Potential applicants for a state license or a registration through the Nationwide Mortgage Licensing System and Registry (the “NMLS&R” ) may submit information in order for the Director or an authorized representative of the Director to reasonably ascertain the likelihood of license or registration approval through a defined preliminary advisory opinion process.
2. Potential applicants may request a preliminary advisory opinion for any of the following reasons:
3. Individuals requesting a preliminary advisory opinion shall complete the Preliminary Advisory Worksheet posted on the Division of Real Estate website found at http://www.dora.state.co.us/real-estate/mortgage/MBForms.htm . Additionally, individuals requesting a preliminary advisory opinion shall pay a fee identical to the license application fee for applicants as prescribed by the Director. Such fee will be applied as the license application fee if the individual chooses to apply.
4. Individuals requesting a preliminary advisory opinion shall submit all corresponding, or relevant documents related to any conduct or actions described in Section 4, subsection 2 of this rule. Incomplete requests will not be processed. The Director or an authorized representative of the Director 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:
5. Additionally, individuals requesting a preliminary advisory opinion shall submit a written and signed personal explanation and detailed account of the facts and circumstances.
6. Any preliminary advisory opinion shall not be binding on the Director or limit the Director’s authority to investigate a future formal application for licensure.
7. An individual seeking a preliminary advisory opinion under this rule 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.
8. The Director or an authorized representative of the Director will provide a favorable or an unfavorable opinion.
1-2-1 MORTGAGE BROKERS BOND REQUIREMENT – [REPEALED] [Repealed 08/30/2009] 1-2-2 SURETY BOND REQUIREMENTS FOR MORTGAGE LOAN ORIGINATORS Section 3. Applicability Section 4. 1-2-2 Surety Bond Requirements for Mortgage Loan Originators Section 5. Enforcement The Director of the Division of Real Estate adopts the following permanent rule entitled, 1-2-2 Surety Bond Requirements for Mortgage Loan Originators , according to her authority as found in § § 12- 61-907 and 910.3, C.R.S.
The notice proposes to add rule 1-2-2. The rule establishes surety bond requirements for mortgage loan originators.
The purpose of this rule is to define the surety bond requirements for mortgage loan originators or any other individual required to be licensed pursuant to § 12-61-902 and § 12-61-903, C.R.S. Section 3. Applicability This rule applies to mortgage loan originators as that term is defined in § 12-61-902(6), C.R.S. and includes those 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. This rule applies to all individuals required to be licensed pursuant to § 12-61-902 and § 12-61-903, C.R.S. Section 4. 1-2-2 Surety Bond Requirements for Mortgage Loan Originators 1. Mortgage loan originators are deemed compliant with the surety bond requirement if their surety bond meets the requirements defined in one of the following three options:
2. The Director has created the Mortgage Loan Originator Licensing Update Form to ensure surety bond information is clearly and concisely disclosed. This form may be found on the Division of Real Estate’s website at http://www.dora.state.co.us/real-estate/mortgage/MBForms.htm . Mortgage loan originators shall use this form to ensure all information defined in this rule is current.
3. Additionally, mortgage loan originators may update all of the information required in this rule electronically. They may access their information through the following website: https://eservices.psiexams.com/index_login.jsp . After entering their password and username, mortgage loan originators may update all information without any fees or costs associated with such action.
4. Applicants for licensure, renewal and reinstatement shall comply with this rule and § § 12-61-903 and 907, C.R.S. in a manner prescribed by the Director. Any licensee who so fails to obtain and maintain a surety bond in accordance with this regulation or fails to provide proof of continuous coverage shall be subject to disciplinary action.
Section 5. Enforcement 1. Noncompliance with this rule, whether defined or reasonably implied in the rule, may result in the imposition of any of the sanctions allowable under Colorado law, including, but not limited to:
1-3-1 ERRORS AND OMISSIONS INSURANCE FOR MORTGAGE LOAN ORIGINATORS Section 3. Applicability Section 4. 1-3-1 Errors and Omissions Insurance for Mortgage Loan Originators Section 5. Enforcement The Director of the Division of Real Estate adopts the following permanent rule entitled, 1-3-1 Errors and Omissions Insurance for Mortgage Loan Originators , according to her authority as found in § § 12- 61-903.5 and 910.3, C.R.S.
The notice proposes to add rule 1-3-1. The rule establishes errors and omissions coverage for mortgage loan originators.
Section 12-61-903.5, C.R.S. requires the Director to determine the terms and conditions of coverage required, including the minimum limits of coverage, the permissible deductible and permissible exemptions. The purpose of this rule is to define the requisite errors and omissions coverage. Section 3. Applicability This rule applies to mortgage loan originators as that term is defined in § 12-61-902(6), C.R.S. and includes those 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. This rule applies to all individuals required to be licensed pursuant to § § 12-61-902 and 12-61-903, C.R.S. Section 4. 1-3-1 Errors and Omissions Insurance for Mortgage Loan Originators 1. 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 three options:
2. Regarding company errors and omissions insurance policies, the company shall provide the Director or an authorized representative of the Director with any and all requested errors and omissions insurance policies relevant to this rule or the Mortgage Loan Originator Licensing Act 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 such a company policy.
3. The Director has created the Mortgage Loan Originator Licensing Update Form to ensure errors and omissions insurance information is clearly and concisely disclosed. This form may be found on the Division of Real Estate’s website at http://www.dora.state.co.us/real- estate/mortgage/MBForms.htm . Mortgage loan originators shall use this form to ensure all information defined in this rule is current.
4. Additionally, mortgage loan originators may update all of the information required in this rule electronically. They may access their information through the following website: https://eservices.psiexams.com/index_login.jsp . After entering their password and username, mortgage loan originators may update all information without any fees or costs associated with such action.
5. For information regarding errors and omissions insurance providers, visit the Division of Real Estate’s website at http://www.dora.state.co.us/real-estate/index.htm .
6. Applicants for licensure, renewal and reinstatement shall comply with this rule and § 12-61-903.5, C.R.S. in a manner prescribed by the Director. Any licensee who so fails to obtain and maintain errors and omissions coverage in accordance with this regulation or fails to provide proof of continuous coverage shall be subject to disciplinary action. Section 5. Enforcement 1. Noncompliance with this rule, whether defined or reasonably implied in the rule, may result in the imposition of any of the sanctions allowable under Colorado law, including, but not limited to:
1-4-1 LICENSING EDUCATION, EXAMINATION AND CONTINUING EDUCATION REQUIREMENTS Section 3. Applicability Section 4. Licensing Education and Examination Section 5. Continuing Education The Director of the Division of Real Estate updates the following permanent rule entitled, 1-4-1 Licensing Education, Examination and Continuing Education Requirements , according to her authority as found in § § 12-61-903(3), 12-61-903(8), 12-61-910.3, and 24-4-103, C.R.S. Pursuant to § 12-61-903(3)(a), mortgage loan originators must complete at least nine hours of fundamental mortgage lending coursework and satisfactorily complete a corresponding written examination. The Director shall approve the fundamental mortgage lending coursework and the written examination.
Additionally, in July of 2008, the Housing and Economic Recovery Act of 2008 was signed into law. Title V of the Economic Recovery Act of 2008 is the S.A.F.E. Mortgage Licensing Act. The S.A.F.E. Mortgage Licensing Act defines minimum national licensing standards for mortgage loan originators and requires states to adopt such provisions. The S.A.F.E. Mortgage Licensing Act requires that pre-licensing education and testing be developed and administered by the Nationwide Mortgage Licensing System and Registry. As a result, the education and testing requirements need to be updated in order to conform to provisions defined in the S.A.F.E. Mortgage Licensing Act, House Bill 09-1085 and with standards established by the Nationwide Mortgage Licensing System and Registry. Furthermore, this rule is imperative as it details how existing licensees may become compliant and how new applicants will be affected.
The purpose of this rule is to clarify the education requirements for individuals required to be licensed as state-licensed loan originators. The purpose is also to ensure compliance with education standards. It is vital to consumer protection and to competent mortgage loan originator practice that mortgage loan originators understand applicable State and Federal Law. Section 3. Applicability This rule applies to mortgage loan originators as that term is defined in § 12-61-902(6), C.R.S. and includes those 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. This rule applies to all individuals required to be licensed pursuant to § § 12-61-902 and 12-61-903, C.R.S. Section 4. Licensing Education and Examination 1. Applicant and Licensee Education Requirements
2. Certificate of Completion
3. Licensing Education Passing Score
4. Qualifying Schools
5. Forty Hour Licensing Education Requirement
6. Exemption Qualifications
7. Authority to Audit Education Provider
8. Retesting
Section 5. Continuing Education 1. The continuing education requirements for individuals licensed prior to January 1, 2009, shall begin after their first license renewal. Individuals licensed prior to January 1, 2009, shall complete at least 8 hours of continuing education courses reviewed and approved by the Nationwide Mortgage Licensing System and Registry or by a company contracted to review and approve continuing education courses and a two hour annual Colorado specific state update course reviewed and approved by the Division of Real Estate each calendar year and prior to subsequent license and registration renewals.
2. The continuing education requirements for individuals licensed on or after January 1, 2009, shall begin after issuance of the initial license. Individuals licensed on or after January 1, 2009, shall complete at least 8 hours of continuing education courses reviewed and approved by the Nationwide Mortgage Licensing System and Registry or by a company contracted to review and approve continuing education courses and a two hour annual Colorado specific state update course reviewed and approved by the Division of Real Estate each calendar year and prior to license and registration renewals.
3. For more information regarding the continuing education requirements, please review the Division of Real Estate website at http://www.dora.state.co.us/real-estate/mortgagebrokerregistration.htm . 1-5-1 MORTGAGE LOAN ORIGINATOR LICENSE INACTIVATION AND REACTIVATION Section 3. Applicability Section 4. 1-5-1 Mortgage Loan Originator License Inactivation and Reactivation The Director of the Division of Real Estate adopts the following permanent rule entitled, 1-5-1 Mortgage Loan Originator License Inactivation and Reactivation, according to her authority as found in §12-61- 910.3, C.R.S.
The notice proposes to add rule 1-5-1. The rule requires administrative fees to be collected when a mortgage loan originator seeks to reactivate their license after it has been inactivated for specific reasons. Section 12-61-903.3 allows the Director of the Division of Real Estate to inactivate licenses for specific reasons. The inactivation process creates an administrative burden on the Division of Real Estate. Accordingly, the purpose of this rule is to establish an administrative fee collected upon reactivation for specific circumstances.
Section 3. Applicability This rule applies to mortgage loan originators as that term is defined in § 12-61-902(6), C.R.S. and includes those 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. This rule applies to all individuals required to be licensed pursuant to § § 12-61-902 and 12-61-903, C.R.S. Section 4. 1-5-1 Mortgage Loan Originator License Inactivation and Reactivation 1. If a mortgage loan originator license is inactivated by the Director or an authorized representative of the Director for one or any combination of the following reasons, the mortgage loan originator shall pay an administrative fee determined by the Director, due to the related increase in administrative burden, in order to reactivate their license:
2. Individuals who have an inactive license are prohibited from practicing as a mortgage loan originator. Additionally, individuals who have an inactive license are prohibited from engaging in any mortgage related activities which requires licensure pursuant to the Colorado Mortgage Loan Originator Licensing Act, Director rule or as prescribed by Director position statement.
3. In order for an inactive mortgage loan originator license 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. All administrative fees shall be collected in the form of a money order or a cashier’s check.
5. The Director has created the Mortgage Loan Originator License Reactivation Form. This form may be found on the Division of Real Estate’s website at http://www.dora.state.co.us/real- estate/mortgage/MBForms.htm .
2-1-1 GROUNDS FOR DENIAL OF LICENSE APPLICATIONS OR FOR SANCTIONS REGARDING LICENSE APPLICANTS, LICENSE RENEWALS, LICENSE REINSTATEMENTS AND LICENSEES – [REPEALED] Repealed 08/30/2009 3-1-1 REASONABLE INQUIRY AND TANGIBLE NET BENEFIT Pursuant to and in compliance with Title 12, Article 61 and Title 24, Article 4, C.R.S. as amended, notice of proposed rulemaking is hereby given, including notice to the Attorney General of the State of Colorado, and to all persons who have requested to be advised of the intention of the Director of the Colorado Division of Real Estate to promulgate rules.
Section 3. Definitions Section 4. Applicability Section 5. 3-1-1 Reasonable Inquiry and Tangible Net Benefit Section 6. Enforcement The statutory basis for this rule, entitled 3-1-1 Reasonable Inquiry and Tangible Net Benefit , is § 12- 61-910.3, C.R.S.
The notice proposes to update rule 3-1-1.
Section 12-61-904.5, C.R.S., states that mortgage loan originators shall have a duty of good faith and fair dealing in all communications and transactions with a borrower. Section 12-61-904.5(1)(b), C.R.S., requires mortgage loan originators to make a reasonable inquiry concerning the borrower’s current and prospective income, existing debts and other obligations, and any other information known to the mortgage loan originator 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 borrowers. Additionally, section 12-61-904.5(1)(a), C.R.S., prohibits mortgage loan originators from recommending or inducing borrowers 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. After consulting with industry leaders, the Division has learned that there is uncertainty in the marketplace regarding the impact of these new provisions, specific to mortgage products and various documentation types. Documentation types include, but are not limited to: stated income; no income verification; no income disclosure; no asset verification; and no asset disclosure.
The mortgage lending community is uncertain if the aforementioned provisions prohibit non-traditional mortgage products and documentation types, since these provisions are new and have not been interpreted by the Division of Real Estate. This uncertainty could negatively impact the availability of mortgage credit to consumers. Due to the recent rise in foreclosures, the decline of the subprime market, and the closing of lenders on a national scale, the Division must adopt rules to clarify the new provisions in an effort to limit further reductions in mortgage credit. The purpose of this rule is to clarify uncertainties regarding reasonable inquiry and reasonable, tangible net benefit. Section 3. Definitions A. “Uniform Residential Loan Application” shall mean the Freddie Mac Form 65 or the Fannie Mae Form 1003 used in residential loan transactions on properties of four or fewer units. The Uniform Residential Loan Application forms defined in this rule are those editions of the forms that are current and effective on January 1, 2008 and do not include any later amendments or editions. The forms are available for inspection at the Division of Real Estate at 1560 Broadway, Suite 925, Denver, Colorado, 80202. These forms are posted on the Division of Real Estate’s website at http://www.dora.state.co.us/real- estate/index.htm in the mortgage loan originator section under forms; the form(s) may be examined at any state publications depository library.
Section 4. Applicability This rule applies to mortgage loan originators as that term is defined in § 12-61-902(6), C.R.S. and includes those 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. This rule applies to all individuals required to be licensed pursuant to § § 12-61-902 and 12-61-903, C.R.S. Section 5. 3-1-1 Reasonable Inquiry and Tangible Net Benefit 1. Section 12-61-904.5(1)(b), C.R.S. does not prohibit specific mortgage products or documentation types. This provision requires the mortgage loan originator to recommend appropriate products.
2. Mortgage loan originators shall be deemed in compliance with 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 at http://www.dora.state.co.us/real- estate/mortgage/MBForms.htm .
3. A mortgage loan originator must first make a reasonable inquiry, in order to determine the reasonable, tangible net benefit for a borrower. The reasonable, tangible net benefit standard in § 12-61- 904.5(1)(a), C.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.
viii. Variable rates;
4. 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.
5. The Division developed a suggested 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 Director.
6. Mortgage loan originators shall provide completed disclosure forms to all borrowers within 72 hours of completion. Furthermore, mortgage loan originators must be able to provide proof to the Director or an authorized representative of the Director that the disclosure forms defined in this rule were in fact provided to the borrower within 72 hours of completion.
7. Mortgage loan originators shall be presumed compliant with this rule when using the suggested form and when disclosures meet the timelines defined in this rule. Section 6. Enforcement 1. Noncompliance with this rule, whether defined or reasonably implied in the rule, may result in the imposition of any of the sanctions allowable under Colorado law, including, but not limited to:
3-1-2 MORTGAGE LOAN ORIGINATORS’ DUTY TO RESPOND AND PROVIDE REQUESTED DOCUMENTS FOR INVESTIGATIONS Pursuant to and in compliance with Title 12, Article 61 and Title 24, Article 4, C.R.S. as amended, notice of proposed rulemaking is hereby given, including notice to the Attorney General of the State of Colorado, and to all persons who have requested to be advised of the intention of the Director of the Colorado Division of Real Estate to promulgate rules.
Section 3. Definitions Section 4. Applicability Section 5. 3-1-2 Mortgage Loan Originators’ Duty to Respond and Provide Requested Documents for Investigations Section 6. Enforcement Section 7. Effective Date The statutory basis for this rule, entitled Mortgage Loan Originators’ Duty to Respond and Provide Requested Documents for Investigations , is §12-61-910.3, C.R.S. The notice proposes to update rule 3-1-2. The rule establishes that mortgage loan originators have a duty to respond and provide requested documentation for investigations. Section 12-61-905(7)(b), C.R.S., states the Director of the Division of Real Estate, upon his or her own motion may, and, upon the complaint in writing of any person, shall, investigate the activities of any licensee or any person who assumes to act in such capacity within the state. Section 12-61-905.5(1)(k), C.R.S. requires mortgage loan originators to maintain possession, for the future use or inspection by an authorized representative of the Director, for a period of four years, of the documents or records prescribed by the rules of the Director or to produce such documents or records upon reasonable request by the Director or by an authorized representative of the Director. The purpose of this regulation is to define what documents should be retained for a period of four years and to require mortgage loan originators or other persons who assume to act in such capacity within the state to provide a written response and all requested documents to the Director or an authorized representative of the Director. Additionally, this regulation prescribes the time period in which all persons and entities shall respond to Director inquiries, including, but not limited to, document and information requests during investigations of complaints or any other investigation conducted for the purpose of determining compliance with Colorado mortgage loan originator law.
Section 3. Definitions 1. “Secure environment” means a system which implements the controlled storage and use of information.
Section 4. Applicability This rule applies to mortgage loan originators as that term is defined in §12-61-902(6), C.R.S. and includes those 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. This rule applies to all individuals required to be licensed pursuant to § §12-61-902 and 12-61-903, C.R.S. Section 5. 3-1-2 Mortgage Loan Originators’ Duty to Respond and Provide Requested Documents for Investigations 1. 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 and all individuals required to be licensed shall provide the Director or his or her authorized representative with all information required by this rule.
2. The response from the person shall contain the following:
3. 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 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, 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 any and all documents used for the purpose of soliciting or marketing borrowers. These documents include, but are not limited to:
4. All documents shall be kept in a secure environment. Electronic storage is acceptable as long as the information is accessible and kept in a secure environment.
5. 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 Director. However, the mortgage loan originator is responsible for compliance with the Director’s request and is subject to disciplinary action if the company fails or refuses to provide the requested documentation.
Section 6. Enforcement 1. Noncompliance with this rule, whether defined or reasonably implied in the rule, may result in the imposition of any of the sanctions allowable under Colorado law, including, but not limited to:
Section 7. Effective Date This permanent rule shall be effective August 6, 2009.
3-1-3 MAINTAINING CURRENT CONTACT INFORMATION AND ALL INFORMATION REQUIRED FOR LICENSING Pursuant to and in compliance with Title 12, Article 61 and Title 24, Article 4, C.R.S. as amended, notice of proposed rulemaking is hereby given, including notice to the Attorney General of the State of Colorado, and to all persons who have requested to be advised of the intention of the Director of the Colorado Division of Real Estate to promulgate rules.
Section 3. Definitions Section 4. Applicability Section 5. 3-1-3 Maintaining Current Contact Information and All Information Required for Licensing Section 6. Enforcement Section 7. Effective Date The statutory basis for this rule, entitled Maintaining Current Contact Information and All Information Required for Licensing , is §12-61-910.3, C.R.S.
The notice proposes to update rule 3-1-3. The rule defines the requirement for mortgage loan originators to maintain contact information and all information required for licensing. The Director of the Division of Real Estate is required to license and discipline mortgage loan originators who are negotiating or originating, or offering or attempting to negotiate or originate mortgage transactions for Colorado borrowers. In order to implement and enforce Colorado mortgage loan originator laws, the Director must have the ability to correspond or request documentation from mortgage loan originators. Furthermore, mortgage loan originators are responsible for maintaining specific requirements for licensing. These include, but are not limited to a surety bond and errors and omissions insurance. Mortgage loan originators are responsible for maintaining such requirements. The purpose of this rule is to ensure that mortgage loan originators maintain current contact information and all information required for licensing to ensure the Director may adequately protect the Colorado consumer.
Section 3. Definitions 1. “Address” means the street address, city, state and postal code.
2. “Physical Address” means the physical location of the property.
3. “Business Name” means 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.
Section 4. Applicability This rule applies to mortgage loan originators as that term is defined in §12-61-902(6), C.R.S. and includes those 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. This rule applies to all individuals required to be licensed pursuant to § §12-61-902 and 12-61-903, C.R.S. Section 5. 3-1-3 Maintaining Current Contact Information and All Information Required for Licensing 1. 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 and all individuals required to be licensed shall maintain all current contact information and all information required for licensing, in a manner acceptable to the Director. Failure to maintain the information identified in this rule shall be grounds for disciplinary action.
2. Contact information shall include, but is not limited to:
3. Information required for licensing includes, but is not limited to:
4. Individuals who originate a mortgage, offer to originate a mortgage, act as a mortgage loan originator, or offer to act as a mortgage originator and all individuals required to be licensed shall update the Director within thirty (30) days of any changes to the information defined in this rule.
5. The Director has created the Mortgage Loan Originator Licensing Update Form to ensure this information is clearly and concisely disclosed. This form may be found on the Division of Real Estate’s website at http://www.dora.state.co.us/real-estate/mortgage/MBForms.htm . Mortgage loan originators shall use this form to ensure all information defined in this rule is current.
6. Additionally, mortgage loan originators may update all of the information required in this rule electronically. They may access their information through the following website: https://eservices.psiexams.com/index_login.jsp . After entering their password and username, mortgage loan originators may update all information without any fees or costs associated with such action.
Section 6. Enforcement 1. Noncompliance with this rule, whether defined or reasonably implied in the rule, may result in the imposition of any of the sanctions allowable under Colorado law, including, but not limited to:
Section 7. Effective Date This permanent rule shall be effective August 6, 2009.
3-1-4 PREPAYMENT PENALTIES Pursuant to and in compliance with Title 12, Article 61 and Title 24, Article 4, C.R.S. as amended, notice of proposed rulemaking is hereby given, including notice to the Attorney General of the State of Colorado, and to all persons who have requested to be advised of the intention of the Director of the Colorado Division of Real Estate to promulgate rules.
Section 3. Definitions Section 4. Applicability Section 5. 3-1-4 Prepayment Penalties Section 6. Enforcement The statutory basis for this rule, entitled Prepayment Penalties , is § 12-61-910.3, C.R.S. The notice proposes to add rule 3-1-4. The rule addresses mortgage transactions that contain specific prepayment penalty terms.
The Director has learned that some extended prepayment penalties lead to higher rates of foreclosure. Specifically, prepayment penalties which extend past the adjustment date of a mortgage loan often severely restrict the ability of the borrower to refinance or sell their property. Additionally, in higher rate environments, borrowers often have only two viable options, to absorb a much higher monthly payment or lose their home through foreclosure proceedings. The Director adopts this rule in order to address the high rate of foreclosures in Colorado resulting from particular prepayment penalties. Pursuant to § 12-61-904.5(1), C.R.S, mortgage loan originators have a duty of good faith and fair dealing in all communications and transactions with a borrower. This duty includes, but is not limited to making a reasonable inquiry into a borrower’s ability to repay a loan and recommending or inducing a borrower to enter into only those transactions that have a reasonable, tangible net benefit to the borrower. The purpose of this rule is to establish a presumption that transactions including a prepayment penalty that extends past the adjustment date of any teaser rate, payment rate or interest rate included in a mortgage loan does not provide a reasonable, tangible net benefit to the borrower. Section 3. Definitions 1. “Adjustable rate mortgage” means a mortgage in which the teaser rate, payment rate or the interest rate changes periodically and in some cases, may adjust according to corresponding fluctuations in an index.
2. “Adjustment date” means the date the teaser rate, payment rate or interest rate changes on an adjustable rate mortgage.
3. “Interest rate” means the rate used to calculate a borrower’s monthly interest payment.
4. “Payment rate” means the rate used to determine a borrower’s monthly payment.
5. “Teaser rate” means a temporary and often low introductory rate on an adjustable rate mortgage.
6. “Prepayment Penalty” means 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. Section 4. Applicability This rule applies to mortgage loan originators as that term is defined in § 12-61-902(6), C.R.S. and includes those 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. This rule applies to all individuals required to be licensed pursuant to § § 12-61-902 and 12-61-903, C.R.S. Section 5. 3-1-4 Prepayment Penalties.
1. Mortgage loan originators who recommend or induce a borrower into a transaction that contains a prepayment penalty which extends past the adjustment date for any type of an adjustable rate mortgage shall be presumed to have violated their duty of good faith and fair dealing requirement pursuant to section 12-61-904.5, C.R.S. This includes, but is not limited to:
2. Information provided to consumers should clearly explain the ramifications of prepayment penalties. Borrowers should be informed of the existence of any prepayment penalty, how it will be calculated and when it may be imposed. A prepayment penalty disclosure form may be prescribed by the Director, completion of which will constitute compliance with this section 5(2). Section 6. Enforcement 1. Noncompliance with this rule, whether defined or reasonably implied in the rule, may result in the imposition of any of the sanctions allowable under Colorado law, including, but not limited to:
5-1-1 MORTGAGE LOAN ORIGINATOR CONTRACTS Pursuant to and in compliance with Title 12, Article 61 and Title 24, Article 4, C.R.S. as amended, notice of proposed rulemaking is hereby given, including notice to the Attorney General of the State of Colorado, and to all persons who have requested to be advised of the intention of the Director of the Colorado Division of Real Estate to promulgate rules.
Section 3. Applicability Section 4. 5-1-1 Mortgage Loan Originator Contracts Section 5. Enforcement Section 6. Effective Date The statutory basis for this rule, entitled Mortgage Loan Originator Contracts , is § 12-61-910.3, C.R.S.
The notice proposes to update rule 5-1-1. The rule defines the requirement for mortgage loan originators to have contracts with borrowers and with mortgage lenders. Section 12-61-913, C.R.S., requires contracts between a mortgage loan originator and a borrower to be in writing and to contain the entire agreement of the parties. This section also requires mortgage loan originators to have a written correspondent or loan originator agreement with a lender before any solicitation of, or contracting with, any member of the public. The purpose of this regulation is to define compliance with the contractual requirements.
Section 3. Applicability This rule applies to mortgage loan originators as that term is defined in § 12-61-902(6), C.R.S. and includes those 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. This rule applies to all individuals required to be licensed pursuant to § § 12-61-902 and 12-61-903, C.R.S. Section 4. 5-1-1 Mortgage Loan Originator Contracts 1. Section 12-61-913(1), C.R.S. states that every contract between a mortgage loan originator and a borrower shall be in writing and shall contain the entire agreement of the parties.
2. Section 12-61-913(2), C.R.S., states 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.
Section 5. Enforcement 1. Noncompliance with this rule, whether defined or reasonably implied in the rule, may result in the imposition of any of the sanctions allowable under Colorado law, including, but not limited to:
Section 6. Effective Date This permanent rule shall be effective August 6, 2009.
5-1-2 MORTGAGE LOAN ORIGINATOR DISCLOSURES Pursuant to and in compliance with Title 12, Article 61 and Title 24, Article 4, C.R.S. as amended, notice of proposed rulemaking is hereby given, including notice to the Attorney General of the State of Colorado, and to all persons who have requested to be advised of the intention of the Director of the Colorado Division of Real Estate to promulgate rules.
Section 3. Definitions Section 4. Applicability Section 5. 5-1-2 Mortgage Loan Originator Disclosures Section 6. Enforcement The Director of the Division of Real Estate adopts the following permanent rule entitled, 5-1-2 Mortgage Loan Originator Disclosures , according to her authority as found in § 12-61-910.3, C.R.S. The notice proposes to update rule 5-1-2. The rule establishes disclosures for mortgage loan originators. Section 12-61-914, C.R.S. requires mortgage loan originators, within three business days after receipt of a loan application or any moneys from a borrower, to disclose specific details of a loan transaction to the borrower. These details include, but are not limited to: the annual percentage rate; finance charge; amount financed; total amount of all payments; third party costs; and terms of a lock-in agreement. The Director has learned that uncertainty exists in the mortgage industry regarding how and when to provide such disclosures.
The purpose of this rule is to ensure that disclosures, set forth in § 12-61-914, C.R.S., are met and that borrowers are provided with accurate and clear disclosures regarding their mortgage loan transaction. Section 3. Definitions A. “Truth-in-Lending Disclosure” means 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).
B. “Good Faith Estimate Disclosure” means the disclosure form established in the Real Estate Settlement Procedures Act, part 3500, appendix C.
C. “Rate” means the teaser rate, payment rate or interest rate used to determine a borrower’s monthly payment or deferred interest specific to reverse mortgage transactions.
D. “Teaser rate” means a temporary and often low introductory rate on an adjustable rate mortgage.
E. “Payment rate” means the rate used to determine a borrower’s monthly payment.
F. “Interest rate” means the rate used to calculate a borrower’s monthly interest payment.
G. “Payment Type” means principal and interest, interest only or negative amortization.
H. “Fixed Term” means the length of time a teaser rate, payment rate or interest rate is fixed and will not adjust.
I. “Index” means the index for an adjustable rate mortgage.
J. “Initial Adjustment Cap” means the limit on how much the interest or payment rate can change at the first adjustment period.
K. “Life Cap” means the limit on how much the interest or payment rate can change over the life of the loan.
L. “Front End Compensation” means the total compensation charged to the borrower that inures to the benefit of the mortgage broker and the mortgage company for which the mortgage broker is an officer, partner, member, contractor, independent contractor, exclusive agent or employee.
M. “Back End Compensation” means the total compensation paid by the funding lender that inures to the benefit of the mortgage broker and the mortgage company for which the mortgage broker is an officer, partner, member, contractor, independent contractor, exclusive agent or employee. Section 4. Applicability This rule applies to mortgage loan originators as that term is defined in § 12-61-902(6), C.R.S. and includes those 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. This rule applies to all individuals required to be licensed pursuant to § § 12-61-902 and 12-61-903, C.R.S. Section 5. 5-1-2 Mortgage Loan Originator Disclosures 1. 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 or any moneys from a borrower.
2. Section 12-61-914 (2)(a), C.R.S., states the written disclosures shall contain the annual percentage rate, finance charge, amount financed, total amount of all payments, number of payments, amount of each payment, amount of points or prepaid interest, and the conditions and terms under which any loan terms may change between the time of disclosure and closing of the loan. If the interest rate is variable, the written disclosure shall clearly describe the circumstances under which the rate may increase, any limitation on the increase, the effect of an increase, and an example of the payment terms resulting from such an increase.
3. Section 12-61-914(2)(b), C.R.S. states the disclosure shall contain the itemized costs of any credit report, appraisal, title report, title insurance policy, mortgage insurance, escrow fee, property tax, insurance, structural or pest inspection, and any other third-party provider’s costs associated with the residential mortgage loan.
4. Section 12-61-914(2)(c), C.R.S. states that mortgage loan originators shall disclose the amount of any commission or other compensation to be paid to the mortgage loan originator, including the manner in which such commission or other compensation is calculated and the relationship of such commission or other compensation to the cost of the loan received by the borrower.
5. Section 12-61-914(2)(d), C.R.S., states the written disclosure, if applicable, shall contain the cost, terms, duration, and conditions of a lock-in agreement and whether a lock-in agreement has been entered, whether the lock-in agreement is guaranteed by the mortgage broker or lender, and, if a lock-in agreement has not been entered, disclosure in a form acceptable to the Director that the disclosed interest rate and terms are subject to change. Section 12-61-914(2)(g), C.R.S. states the mortgage loan originator shall disclose whether and under what conditions any lock-in fees are refundable to the borrower.
6. Individuals who originate a mortgage or act as a mortgage loan originator are required to keep records of the disclosures required in this rule, for a period of four years, for the purposes of inspection by the Director or authorized representative of the Director.
7. Mortgage loan originators shall provide completed disclosure forms to all borrowers within 72 hours of completion. Furthermore, mortgage loan originators must be able to provide proof to the Director or an authorized representative of the Director that the disclosure forms defined in this rule were in fact provided to the borrower within 72 hours of completion. Section 6. Enforcement 1. Noncompliance with this rule, whether defined or reasonably implied in the rule, may result in the imposition of any of the sanctions allowable under Colorado law, including, but not limited to:
7-1-1 DUAL STATUS DISCLOSURE Pursuant to and in compliance with Title 12, Article 61 and Title 24, Article 4, C.R.S. as amended, notice of proposed rulemaking is hereby given, including notice to the Attorney General of the State of Colorado, and to all persons who have requested to be advised of the intention of the Director of the Colorado Division of Real Estate to promulgate rules.
Section 3. Applicability Section 4. 7-1-1 Dual Status Disclosure Section 5. Enforcement The statutory basis for this rule, entitled 7-1-1 Dual Status Disclosure , is § 12-61-910.3, C.R.S. The notice proposes to update rule 7-1-1. The rule requires mortgage loan originators to inform borrowers if they are also acting as the real estate broker on their transaction. Colorado statutes require mortgage loan originators, before providing mortgage services to the borrower, to disclose all facts material to the transaction. The Director has determined that individuals who operate with dual status licenses as real estate brokers and mortgage loan originators shall disclose this fact to the borrower. Additionally, this rule creates a new disclosure form that notifies borrowers of an individuals dual status and of their right to shop for alternate services. The purpose of this rule is to clearly notify mortgage loan originators that their dual status as a real estate broker and a mortgage loan originator must be disclosed to the borrower. Furthermore, this rule establishes a disclosure form mortgage loan originators may use to disclose such relevant information. Section 3. Applicability This rule applies to mortgage loan originators as that term is defined in § 12-61-902(6), C.R.S. and includes those 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. This rule applies to all individuals required to be licensed pursuant to § § 12-61-902 and 12-61-903, C.R.S. Section 4. 7-1-1 Dual Status Disclosure 1. Colorado law, specifically section 12-61-912, C.R.S., provides that a mortgage loan originator shall not act as a 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, unless the mortgage loan originator first makes a full and fair disclosure to the borrower of all material features of the loan product and all facts material to the transaction, in addition to any other disclosures required by law. Additionally, the mortgage loan originator must maintain his or her mortgage loan originator business activities and mortgage loan originator business records separate and apart from the real estate broker activities.
2. The Director prohibits individuals from acting as a mortgage loan originator and real estate broker or real estate salesperson, on the same transaction, unless they comply with this rule.
3. The Director has determined that dual status is a material fact to real estate transactions and shall be disclosed to the borrower(s).
4. The Director 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 at http://www.dora.state.co.us/real-estate/mortgage/MBForms.htm . Mortgage loan originators 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 Director.
5. The Colorado Dual Status Disclosure form shall be completed and disclosed within three (3) business days after receipt of a loan application or any moneys from a borrower.
6. 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 four years.
7. Mortgage loan originators shall provide completed disclosure forms to all borrowers within 72 hours of completion. Furthermore, mortgage loan originators must be able to provide proof to the Director or an authorized representative of the Director that the disclosure forms defined in this rule were in fact provided to the borrower within 72 hours of completion. Section 5. Enforcement 1. Noncompliance with this rule, whether defined or reasonably implied in the rule, may result in the imposition of any of the sanctions allowable under Colorado law, including, but not limited to:
8-1-1 MORTGAGE LOAN ORIGINATOR ADVERTISING Pursuant to and in compliance with Title 12, Article 61 and Title 24, Article 4, C.R.S. as amended, notice of proposed rulemaking is hereby given, including notice to the Attorney General of the State of Colorado, and to all persons who have requested to be advised of the intention of the Director of the Colorado Division of Real Estate to promulgate rules.
Section 3. Definitions Section 4. Applicability Section 5. 8-1-1 Mortgage Loan Originator Advertising Section 6. Enforcement The Director of the Division of Real Estate adopts the following rule entitled, 8-1-1 Mortgage Loan Originator Advertising , according to her authority as found in § 12-61-910.3, C.R.S. The notice proposes to update rule 8-1-1. The rule establishes advertising guidelines for mortgage loan originators.
Section 12-61-910.4, C.R.S., states the Director shall adopt rules regarding the marketing of nontraditional mortgages by mortgage loan originators. In adopting such rules, the Director is required to incorporate appropriate provisions of the final “Interagency Guidance on Nontraditional Mortgage Product Risks” released on September 29, 2006.
Section 12-61-911(1)(j), C.R.S., in summary, prohibits mortgage loan originators from failing to comply with the Truth in Lending Act. The Truth in Lending Act defines specific requirements for advertising. The purpose of this rule is to ensure that individuals who originate a mortgage or act as a mortgage loan originator are familiar with all current regulations that address advertising and to ensure the advertising of nontraditional mortgage products is addressed.
Section 3. Definitions 1. “Interest Only Mortgage Loan” means a nontraditional mortgage on which, for a specified number of years the borrower is required to pay only the interest due on the loan, during which time, the rate may fluctuate or may be fixed. After the interest only period, the rate may be fixed or fluctuate, based on the prescribed index, and payments include both the principal and interest.
2. “Nontraditional Mortgage” means any mortgage product other than a 30-year fixed rate mortgage.
3. “Payment Option Arm” means a nontraditional adjustable rate mortgage that allows the borrower to choose from a number of different payment options. For example, each month, the borrower may choose a minimum payment option based on a “start” or introductory interest rate, an interest only payment option based on the fully indexed interest rate, or a fully amortizing principal and interest payment option based on a 15 year or 30 year loan term, plus any required escrow payments. The minimum payment option can be less than the interest accruing on the loan, resulting in negative amortization. After a specified number of years, or if the loan reaches a certain negative amortization cap, the required monthly payment amount is recast to require payments that will fully amortize the outstanding balance over the remaining loan term.
4. “Reduced Documentation” means a loan feature that is commonly referred to as “low doc/no doc,” “no income/no asset,” “stated income,” or “stated assets.” For mortgage loans with this feature, an institution sets reduced or minimal documentation standards to substantiate the borrower’s income and assets.
5. “Simultaneous Second Lien Loan” means a lending arrangement where either a closed end second lien or a home equity line of credit is originated simultaneously with the first lien mortgage loan, typically in lieu of a higher down payment.
6. Advertisement: An "advertisement" is any commercial message that promotes consumer credit. "Advertisements" may appear:
7. "Annual Percentage Rate" means the charge for credit, stated as a percentage, and expressed as an annualized rate as defined by the Truth in Lending Act.
8. "Closed-end credit" includes all consumer credit that does not fit the definition of open-end credit. Closed-end credit consists of both sales credit and loans. In a typical closed-end credit transaction, credit is advanced for a specific time period, and the "amount financed," "finance charge,' and "schedule of payments" are agreed upon by the lender and the customer.
9. "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".
10. "Credit Sale" is a transaction in which the seller is also the creditor, at least initially. Often, the seller- creditor will later assign the installment sales contract to another entity, such as a finance company or a bank.
11. "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.
12. "Downpayment" is an amount paid to reduce the cash price of goods or services purchased in a credit sale transaction. The value of a trade-in is included in the downpayment. It can include a "pick-up" or deferred downpayment that is not subject to a finance charge and is due no later than the second regularly scheduled payment. The downpayment does not include any prepaid finance charges such as points.
13. "Finance Charge" is 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.
14. "Terms of Repayment" generally refers to the payment schedule, including the number, timing, and amount of the payments, including any final "balloon" payment, scheduled to repay the debt. Section 4. Applicability This rule applies to mortgage loan originators as that term is defined in § 12-61-902(6), C.R.S. and includes those 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. This rule applies to all individuals required to be licensed pursuant to § § 12-61-902 and 12-61-903, C.R.S. Section 5. 8-1-1 Mortgage Loan Originator Advertising 1. Mortgage loan originators shall comply with all advertising provisions, regulations and official staff commentary of the Truth in Lending Act (Regulation Z). Such provisions, regulations and official staff commentary include:
2. Mortgage loan originators may review the Truth in Lending Act (Regulation Z) on the Division of Real Estate’s website at http://www.dora.state.co.us/real-estate/index.htm . Additionally, mortgage loan originators may also review the Truth in Lending Act (Regulation Z) at http://ecfr.gpoaccess.gov/cgi/t/text/text-idx? c=ecfr&sid=635f26c4af3e2fe4327fd25ef4cb5638&tpl=/ecfrbrowse/Title12/12cfr226_main_02.tpl .
3. Individuals who originate a mortgage or act as a mortgage loan originator may advertise only credit terms that are actually available to the consumer. "Bait and switch" credit or promotions are not allowed. For example, no advertisement may state that a specific installment payment or a specific downpayment can be arranged unless the creditor is prepared to make those arrangements. However, you may advertise terms that will be offered only for a limited time or terms that will become available at a known future date.
4. If you advertise closed-end credit with a "triggering term," you also must disclose other major terms, including the annual percentage rate. This rule is intended to ensure that all important terms of a credit plan, not just the most attractive ones, appear in an ad. The triggering terms for closed-end credit are:
5. If your ad for closed-end credit uses a triggering term, it also must include the following information:
6. If your ad shows the finance charge as a rate, that rate must be stated as an "annual percentage rate," using that term or the abbreviation "APR." Your ad must state the annual percentage rate, even if it is the same as the simple interest rate. Disclosure of the annual percentage rate shall be disclosed as clearly and conspicuously as any interest rate in the advertisement. If you want to show only a rate, and the APR is stated in the ad, no other credit information need be included: the "triggering term" requirement does not apply because the rate and APR are not triggering terms. Thus, an advertisement could simply state, "Assume 10% annual percentage rate" or "10% annual percentage rate mortgages available."
7. Ads for variable-rate credit must state that the rate may increase or that it is subject to change, but need not explain how changes will be made.
8. The annual percentage rate in variable-rate financing ads must be accurate. To help calculate the APR, keep two principles in mind. First, remember there is only one APR per loan, regardless of how many interest rates may apply during the term of the loan. Second, assume that any "index" rates, such as the prime rate or the 6-month Treasury bill, used to determine future interest rate changes will remain constant during the life of the loan.
9. Special rules apply when you advertise a loan in which the seller or a third party "buys down" the interest rate during the early years of the loan.
10. Adjustable rate mortgages (ARMs) often have a first-year "discount" or "teaser" feature in which the initial rate is substantially reduced. In these loans, the first year's rate is not computed in the same way as the rate for later years. Often, the "spread" or "margin" that is normally added to an "index", such as the one-year Treasury-note rate, to determine changes in the interest rate in the future is not included in the first year of a discounted ARM offered by a creditor.
11. In some transactions, particularly some graduated payment loans, the consumer's payments for the first few years of the loan may be based on an interest rate lower than the rate for which the consumer is liable. This situation is referred to as "negative amortization." As with buydowns, special rules apply when you advertise the "effective" or "payment" rates for these transactions.
12. The ad need not show all the different payments required during the life of the loan, if you advertise a mortgage in which the payments vary because:
13. When an advertisement promotes a variable-rate loan that is not a "discount" or a "buydown" and has no other special features, the advertisement contains triggering terms that require disclosure of the "terms of repayment", which include the payment amounts. In this ad, only one payment amount need be disclosed to comply with the law.
14. When an advertisement requiring disclosure of the payment schedule promotes a discounted variable-rate loan, rather than a variable rate plan with no special features, the advertised payment schedule must show all payment amounts that can be determined before consummation of the loan. For example, if the discounted rate is applicable for only one year, the advertisement should show a payment for the first year based on the reduced interest rate in effect for that year. If the interest rate is subject to annual increases thereafter, the advertisement must show a second payment amount based upon the interest rate that would have been in effect at consummation, except for the discount feature of the loan.
15. All advertisements shall have at least one (1) responsible individual who is accountable. If a mortgage loan originator license is applicable, advertisements shall contain the license number for the responsible mortgage loan originator. If a mortgage loan originator license is not applicable, then the responsible party shall be identified by name in each advertisement.
16. All advertisements shall clearly and conspicuously provide the following information:
17. All advertisements shall include the following statement:
18. Advertisements containing an interest rate, payment rate, teaser rate or an annual percentage rate must be reasonably available on the day of the advertisement or the day the advertisement is received.
19. Advertisements containing an interest rate, payment rate, teaser rate or annual percentage rate must include all material terms and conditions specific to the rates advertised. Material terms and conditions include, but are not limited:
20. Advertisements promoting non-traditional mortgage products, as defined in this rule, must clearly demonstrate the type of product advertised.
Section 6. Enforcement 1. Noncompliance with this rule, whether defined or reasonably implied in the rule, may result in the imposition of any of the sanctions allowable under Colorado law, including, but not limited to:
_____________________________________________________ Editor’s Notes History Mortgage Broker Registration emer. rule eff. 06/01/2007. Good-Faith Temporary Registration for Mortgage Brokers emer. rule eff. 08/31/2007. Rule 1-1-1 eff. 09/30/2007.
Reasonable Inquiry and Tangible Net Benefit emer. rule eff. 09/04/2007. Mortgage Broker Disclosures emer. rule eff. 10/26/2007. Errors and Omissions Insurance for Mortgage Brokers emer rule eff. 11/13/2007. Mortgage Brokers Duty to Respond and Provide Requested Documents for Investigations eff. 11/29/2007. Reasonable Inquiry and Tangible Net Benefit emer. rule eff. 12/04/2007. Rules 1-1-2 and 3-1-1 eff. 1/30/2008.
Prepayment Penalties emer. rule eff. 12/14/2007.
Prepayment Penalties emer. rule eff. 12/26/2007.
Errors and Omissions Insurance for Mortgage Brokers emer rule eff. 12/26/2007. Rules 3-1-2, 3-1-3, 3-1-4, 5-1-1 eff. 03/01/2008.
Mortgage Broker Disclosures emer. rule eff. 01/25/2008. Rule 1-3-1 emer. rule eff. 03/26/2008.
Rules 1-3-1, 5-1-2, 8-1-1 eff. 04/01/2008.
Rule 1-4-1 emer. rule eff. 5/2/2008.
Grounds for Denial emer. rule eff. 07/28/2008.
Rule 1-4-1 emer. rule eff. 07/30/2008 (See Emer. Rule in August 2008 Register). Rule 1-4-1 eff. 08/30/2008.
Rule 2-1-1 emer. rule eff. 10/28/2008.
Rule 2-1-1 eff. 12/30/2008.
Mortgage Broker Education Extension emer. rule eff. 12/01/2008; expired 03/01/2009. Rule 1-2-1 eff. 01/30/2009.
Increasing the Errors and Omissions Insurance Deductible for Reverse Mortgage Transactions emer. rule:
Rules 1-4-1; 7-1-1 eff. 03/02/2009.
Temporary Licenses – Repealing the Education and Testing Requirements emer. rule: eff. 04/17/2009; expired 7/17/2009.
Increasing the Errors and Omissions Insurance Deductible for Reverse Mortgage Transactions emer. rule:
Mortgage Loan Originator Immediate and Automatic Temporary License emer. rule eff. 08/05/2009; expired 11/05/2009.
Mortgage Loan Originator License Inactivation and Reactivation emer. rule eff. 08/05/2009. Rules 1-1-2, 1-2-1, 1-4-1, 2-1-1, 3-1-2, 3-1-3, 3-1-4, 5-1-1 eff. 08/30/2009. Rules 1-2-2, 1-3-1, 1-5-1, 3-1-1, 5-1-2, 7-1-1, 8-1-1 eff. 09/30/2009. Rules 1-1-4, 1-4-1 eff. 10/30/2009.
Rule 1-1-5 eff. 11/30/2009.