4 CCR 725-3
DEPARTMENT OF REGULATORY AGENCIES Division of Real Estate MORTGAGE LOAN ORIGINATORS AND MORTGAGE COMPANIES 4 CCR 725-3 [Editor’s Notes follow the text of the rules at the end of this CCR Document.] _________________________________________________________________________ 1-1-1. [REPEALED EFF. 02/14/2011] 1-1-2 MORTGAGE LOAN ORIGINATOR TEMPORARY LICENSE Pursuant to and in compliance with Title 12, Article 61 and Title 24, Article 4, C.R.S., as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 Colorado Attorney General, and to all persons who have requested to be advised of the intention of Board of Mortgage Loan Originators to promulgate rules.
Section 4. 1-1-2 Mortgage Loan Originator Temporary License The statutory basis for this rule entitled 1-1-2 Mortgage Loan Originator Temporary License , is section 12-61-910.3, C.R.S.
This notice proposes to add rule 1-1-2. The rule establishes a temporary license for mortgage loan originators.
Section 12-61-905(10), C.R.S., requires the Board of Mortgage Loan Originators 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.
This rule applies to all individuals required to be licensed pursuant to sections 12-61-902 and 12-61-903, C.R.S.
Section 4. 1-1-2 Mortgage Loan Originator Temporary License 1. Mortgage loan originators who demonstrate to the Board a good-faith effort to comply with the requirements pursuant to Colorado Revised Statutes 12-61-901, et seq. , may be issued a temporary license upon completion of the requirements set forth below:
2. Only individuals who are licensed as state-licensed loan originators may hire and sponsor unlicensed 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 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 are prohibited.
5. Individuals seeking a temporary license shall complete the paper version of the 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 Board inactivate their temporary license upon determination by the Board that the requirements of the law have not been met. Applicants shall be notified via electronic mail, fax, or U.S. mail at 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 Board shall have the same force and effect of the license required by the Mortgage Loan Originator Licensing and Mortgage Company Registration Act 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 Board, the Board shall license the applicant in accordance with section 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 .
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 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. 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 Board of Mortgage Loan Originators to promulgate rules.
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 Board or an authorized representative of the Board 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.
This rule applies to mortgage loan originators as that term is defined in § 12-61-902(6), C.R.S. 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 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.
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 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:
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 Board or limit the Board’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 Board or an authorized representative of the Board will provide a favorable or an unfavorable opinion.
1-1-6 RESIDENTIAL MORTGAGE LOANS - [REPEALED EFFECTIVE 03/30/2012] 1-1-7 LOAN MODIFIER LICENSURE AND THE REQUIRED USE OF A LOAN MODIFICATION CONTRACT 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 Board of Mortgage Loan Originators to promulgate rules.
Section 4. Definitions Section 5. 1-1-7 Loan Modifier Licensure and the Required Use of a Loan Modification Contract Section 6. Enforcement The statutory basis for this rule, entitled 1-1-7 Loan Modifier Licensure and the Required Use of a Loan Modification Contract , is § 12-61-910.3, C.R.S.
This notice proposes to add rule 1-1-7. The rule requires licensure for individuals who directly or indirectly take residential loan modification applications or who negotiate, offer, or attempt to negotiate or offer loan modifications. Direct managers of such individuals also must be licensed. Finally, this rule requires that individuals who offer or negotiate loan modifications use the Colorado Loan Modification Services Contract prescribed by this rule.
The Board of Mortgage Loan Originators finds that a rule regarding loan modifications is necessary in order to provide clarity to the industry. The Board has learned of individuals negotiating loan modification terms for borrowers and has received many inquiries regarding the applicability of current mortgage loan originator licensing law. Specifically, individuals are communicating directly with borrowers and borrowers’ lenders in order to negotiate terms of a loan modification. In many instances, Colorado consumers are being charged high up front fees regardless of services rendered. The Board has also learned that consumers are being advised to cease making mortgage payments, even when they are already delinquent on payments. Additionally, there are existing loan modification services that are offered by U.S. Department of Housing and Urban Development (HUD) approved non-profit 501(c)(3) agencies which employ housing counselors around the State of Colorado. Such HUD-approved services are offered by housing counselors for free and are not associated with any compensation or other benefit from the borrower to the housing counselor. The purpose of this rule is to clearly notify loan modifiers (those who engage in the act of directly or indirectly negotiating a loan modification) of the applicability of Colorado mortgage loan originator laws and to require the use of a loan modification contract. This rule applies to all individuals required to be licensed pursuant to § § 12-61-902 and 12-61-903, C.R.S.
Section 4. Definitions A. "HUD approved housing counseling agency" means 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.
B. "Short sale" means 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.
C. "Loan modification" means 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.
D. "Loan modifier" means 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.
Section 5. 1-1-7 Loan Modifier Licensure and the Required Use of a Loan Modification Contract 1. Section 12-61-902(6)(a), C.R.S. defines a mortgage loan originator as an individual who takes a residential mortgage loan application or offers or negotiates terms of a residential mortgage loan. It is the Board’s position that individuals offering or negotiating loan modifications meet the definition of a mortgage loan originator. Pursuant to section 12-61-903(1)(a), C.R.S, all persons who meet the definition of a mortgage loan originator are required to be licensed. As a result, individuals 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 Colorado mortgage loan originators.
2. Pursuant to section 12-61-902(7), C.R.S., individuals who directly supervise individuals who take residential loan modification applications or individuals who negotiate, offer, or attempt to negotiate or offer loan modifications are required to be licensed as mortgage loan originators and as state-licensed loan originators by July 31, 2010.
3. All individuals required to be licensed shall comply with all other provisions of the Colorado Mortgage Loan Originator Licensing Act and all Board rules.
4. 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.
5. 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 at http://www.dora.state.co.us/real-estate/mortgage/MBForms.htm . 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.
6. The Colorado Loan Modification Services Contract prescribed by this regulation shall be completed when an application is taken.
7. This rule shall not be construed to include 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.
8. The Board’s position on this matter shall not be construed to include employees of mortgage loan servicing companies operating on behalf of the borrowers’ mortgage lenders.
9. Licensed Real Estate Brokers engaged in licensed activities when performing services within the above 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 above, 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. See MLO 1.5 Position Statement.
10. 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, 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. 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 following sanctions allowable under Colorado law, including, but not limited to:
1-1-8 S.A.F.E. ACT COMPLIANCE RULE 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 Board of Mortgage Loan Originators to promulgate rules.
Section 4. Definitions Section 5. 1-1-8 S.A.F.E Act Compliance Rule Section 6. Enforcement The statutory basis for this rule, entitled 1-1-8 S.A.F.E. Act Compliance Rule , is § § 12-61-903(10) and 12-61-910.3, C.R.S.
This notice proposes to add rule 1-1-8. This rule, unless otherwise determined by the Consumer Finance Protection Bureau (the “Bureau” ), brings Colorado’s mortgage loan originator regulatory program into compliance with the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (the “S.A.F.E. Act” ), 12 U.S.C. § § 5101-5116.
In 2008, Congress passed the Housing and Economic Recovery Act. A small portion of this act includes the S.A.F.E. Act, which established minimum licensing standards for mortgage loan originators. Furthermore, the S.A.F.E. Act mandated states to adopt such standards. If states fail to do so, the Bureau is responsible for regulating mortgage loan originators pursuant to the provisions defined in the S.A.F.E.
Act. The Board of Mortgage Loan Originators believes there would be deleterious impacts on mortgage loan originators and the mortgage lending industry if Colorado fails to comply with the S.A.F.E. Act, which would result in direct federal oversight. In 2011, the Department of Urban Housing and Urban Development adopted a regulation that defined terms and provided clarity on a number of issues. See 76 FR 78487, Dec. 19, 2011, Regulation H, issued by the Bureau of Consumer Financial Protection to implement the Secure and Fair Enforcement for Mortgage Licensing Act of 2008, title V of the Housing and Economic Recovery Act of 2008 (S.A.F.E. Act) (Pub. L. 110–289, 122 Stat. 2654, 12 U.S.C. 5101 et seq. ). As a result, the Board believes it is important for the industry to adopt such definitions in the name of conformity and to provide appropriate clarity to the industry regarding the incorporation of the S.A.F.E. Act into Colorado law. Accordingly, the purpose of this rule is to ensure that Colorado is compliant with the S.A.F.E. Act, to ensure consistency across states, and to provide clarity to the mortgage lending industry. This rule applies to all individuals required to be licensed pursuant to § § 12-61-902 and 12-61-903, C.R.S.
Section 4. Definitions A. “A residential mortgage loan application” means a request, in any form, for an offer (or a response to a solicitation of an offer) of residential mortgage loan terms, and the information about the borrower or prospective borrower that is customary or necessary in a decision on whether to make such an offer.
B. “An employee” means 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.
C. An “independent contractor” means 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 and registered in accordance with section 1008.103(a), or is not required to be licensed, in accordance with sections 1008.103(e)(5), (6), or (7).
D. “Taking a residential loan application” occurs if the individual receives a residential mortgage loan application 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.
E. “Offering or negotiating terms of a residential mortgage loan” means to present considerations to a borrower or prospective borrower particular residential mortgage loan terms, communicating directly or indirectly with a borrower, or prospective borrower for the purpose of reaching a mutual understanding about prospective residential mortgage loan terms, recommending, referring or steering a borrower or prospective borrower to a particular lender or set of residential mortgage loan terms, in accordance with a duty to or incentive from any person other than the borrower or prospective borrower, and receiving or expecting to receive payment of money or anything of value in connection with the activities of this section or as a result of any residential mortgage loan terms entered into as a result of such activities. Section 5. 1-1-8 S.A.F.E. Act Compliance Rule 1. Mortgage loan originator right to challenge information in the Nationwide Mortgage Licensing System and Registry (the “NMLS” ).
2. Determining bona fide non-profit entities.
3. Periodic examinations of entities determined to be bona fide non-profit organizations.
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 following sanctions allowable under Colorado law, including, but not limited to:
1-2-1 MORTGAGE BROKERS BOND REQUIREMENT – [REPEALED] [Repealed 08/30/2009] 1-2-2 SURETY BOND REQUIREMENTS FOR MORTGAGE LOAN ORIGINATORS Section 4. 1-2-2 Surety Bond Requirements for Mortgage Loan Originators Section 5. Enforcement The Board of Mortgage Loan Originators updates the following permanent rule entitled, 1-2-2 Surety Bond Requirements for Mortgage Loan Originators , according to the authority prescribed in § § 12- 61-907 and 910.3, C.R.S.
The notice proposes to update 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. 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. 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 this rule 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 non-compliance regarding the surety bond requirement for individual licensees operating under such company bond.
3. Mortgage loan originators shall use the Mortgage Loan Originator Licensing Update Form to ensure surety bond information is clearly and concisely disclosed and that all information required by this rule is current. 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 .
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. 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 Board. Any licensee who so fails to obtain and maintain a surety bond in accordance with this rule 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 4. 1-3-1 Errors and Omissions Insurance for Mortgage Loan Originators Section 5. Enforcement The Board of Mortgage Loan Originators (the “Board” ) updates the following permanent rule entitled, 1- 3-1 Errors and Omissions Insurance for Mortgage Loan Originators , according to the authority prescribed in § § 12-61-903.5 and 910.3, C.R.S.
The notice proposes to update 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 Board 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. 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 Board, or an authorized representative of the Board, with any and all requested errors and omissions insurance policies relevant to this rule 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.
3. Mortgage Loan originators shall use the Mortgage Loan Originator Licensing Update Form to ensure their errors and omissions insurance information is current and 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 .
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 Board. Any licensee who so fails to obtain and maintain errors and omissions insurance coverage in accordance with this rule 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 4. 1-4-1 Licensing Education, Examination and Continuing Education Requirements Section 5. Continuing Education The Board of Mortgage Loan Originators updates the following permanent rule entitled, 1-4-1 Licensing Education, Examination and Continuing Education Requirements, according to the authority prescribed in § § 12-61-903(3), 12-61-903(8), 12-61-910.3, and 24-4-103, C.R.S. The purpose of this rule is to clarify the education requirements for mortgage loan originators to first obtain their state license and then maintain that license by completing continuing education requirements. It is vital to consumer protection and to a competent mortgage loan originator practice that mortgage loan originators understand applicable State and Federal laws. Please contact the Division of Real Estate if you have any questions.
Pursuant to § 12-61-903(3)(a), C.R.S. mortgage loan originators must complete at least nine (9) hours of fundamental mortgage lending coursework and satisfactorily complete a corresponding written examination.
Additionally, in July of 2008, the Housing and Economic Recovery Act of 2008 was signed into law. Title V of the Housing and 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, Colorado's education and testing requirements were 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. Consequently, this rule outlines how existing licensees may become compliant and how new applicants will be affected. This rule applies to all individuals required to be licensed pursuant to § § 12-61-902 and 12-61-903, C.R.S.
Section 4. 1-4-1 Licensing Education, Examination and Continuing Education Requirements 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 eight (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 or reinstatements.
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 eight (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 or reinstatements.
3. For more information regarding the continuing education requirements, please review the Division of Real Estate website.
4. The Colorado Division of Real Estate will maintain a list of course providers approved to teach the Colorado two (2) hour annual update course on the Division website so interested parties may research and learn where the course is offered.
5. Licensee requirements:
6. Colorado two (2) hour annual update course provider requirements:
This notice proposes to update 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, C.R.S., allows the Board of Mortgage Loan Originators to inactivate licenses for specific reasons. The inactivation process creates an administrative burden on the Division of Real Estate, which includes ensuring the applicant is compliant with all licensing requirements. This task is similar in nature to review of a license application, but is often less intensive procedurally. Accordingly, the purpose of this rule is to establish an administrative fee collected upon reactivation for specific circumstances.
This rule applies to all individuals required to be licensed pursuant to sections 12-61-902 and 12-61-903, C.R.S.
Section 4. 1-5-1 Mortgage Loan Originator License and Registration Inactivation and Reactivation 1. 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, 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 and Mortgage Company Registration Act, Board rule, or as prescribed by a Board 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. In order for an inactive mortgage loan originator license to be reactivated, the individual seeking reactivation must pay the requisite administrative fee. All administrative fees shall be collected in the form of a money order or a cashier’s check.
5. The Board 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 Colorado Attorney General, and to all persons who have requested to be advised of the intention of the Board of Mortgage Loan Originators 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 section 12-61-910.3, C.R.S.
This 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. After making such an inquiry, a mortgage loan originator must 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, 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 Board of Mortgage Loan Originators. 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 Board 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 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 all individuals required to be licensed pursuant to sections 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 section 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 section 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 Board 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 Board.
6. Mortgage loan originators shall provide completed disclosure forms to all borrowers within three (3) business days of completion. Furthermore, mortgage loan originators 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 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 ORIGINATOR AND MORTGAGE COMPANY DUTIES 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 Colorado Attorney General, and to all persons who have requested to be advised of the intention of the Board of Mortgage Loan Originators to promulgate rules.
Section 3. Definitions Section 4. Applicability Section 5. 3-1-2 Mortgage Loan Originator and Mortgage Company Duties to Respond and Provide Requested Documents for Investigations Section 6. Enforcement The statutory basis for this rule, entitled 3-1-2 Mortgage Loan Originator and Mortgage Company Duties to Respond and Provide Requested Documents for Investigations , is section 12-61-910.3, C.R.S.
This notice proposes to update rule 3-1-2. The rule establishes that mortgage loan originators and mortgage companies have a duty to respond to and provide requested documentation for investigations conducted by the Board of Mortgage Loan Originators.
Section 12-61-905(7)(b), C.R.S., states that the Board of Mortgage Loan Originators 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. Section 12-61-905.5(1)(k), C.R.S., requires mortgage loan originators to maintain possession of the documents prescribed by the rules of the Board, for a period of four (4) years, for the future use or inspection by an authorized representative of the Board. Section 12-61-905.1(1)(b), C.R.S., requires mortgage companies to maintain possession of the documents or records prescribed by the rules of the Board, for a period of four (4) years, for the future use or inspection by an authorized representative of the Board. 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 and mortgage companies to provide a written response and all requested documents to the Board or an authorized representative of the Board. Additionally, this regulation prescribes the time period in which all persons and entities shall respond to Board 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 the Mortgage Loan Originator Licensing and Mortgage Company Registration Act.
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 all persons required to be licensed or registered pursuant to sections 12-61-902 and 12-61-903, C.R.S.
Section 5. 3-1-2 Mortgage Loan Originator and Mortgage Company Duties to Respond and Provide Requested Documents for Investigations 1. Persons required to be licensed or registered pursuant to sections 12-61-902 and 12-61-903, C.R.S., shall provide the Board or the Board’s representative with all information required by this rule.
2. The response from the person shall contain the following:
3. 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 (4) 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:
4. All mortgage loan originators 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.
5. All documents required in this rule shall be kept in a secure environment. Electronic storage is acceptable as long as the information is accessible and kept in a secure environment. 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:
3-1-3 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 Colorado Attorney General, and to all persons who have requested to be advised of the intention of the Board of Mortgage Loan Originators 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 The statutory basis for this rule, entitled Maintaining Current Contact Information and All Information Required for Licensing , is section 12-61-910.3, C.R.S. This notice proposes to update rule 3-1-3. The rule defines the requirement for mortgage loan originators and all other individuals required to be licensed to maintain contact information and all information required for licensing.
In order to implement and enforce Colorado mortgage loan originator laws, the Board must have the ability to correspond or request documentation from licensees. Furthermore, licensees are responsible for maintaining specific requirements for licensing. These include, but are not limited to a surety bond and errors and omissions insurance. All licensees are responsible for maintaining such requirements. The purpose of this rule is to ensure that licensees maintain current contact information and all information required for licensing to ensure the Board may adequately protect Colorado consumers. 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 all individuals required to be licensed pursuant to sections 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 required to be licensed as state licensed loan originators 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.
2. Contact information shall include, but is not limited to:
3. Information required for licensing includes, but is not limited to:
4. 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. 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. All individuals required to be licensed as state licensed loan originators shall maintain all information prescribed in this rule on the Nationwide Mortgage Licensing System and Registry and in conformance to procedures developed by the Nationwide Mortgage Licensing System and Registry.
7. 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:
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 Board of Mortgage Loan Originators 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 update rule 3-1-4. The rule addresses mortgage transactions that contain specific prepayment penalty terms.
The Board 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 Board updates 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 which include a prepayment penalty that extends past the adjustment date of any teaser rate, payment rate, or interest rate included in the mortgage loan do 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 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. 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 Board, 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:
3-1-5 RESPONSIBILITY TO SUBMIT NMLS CALL REPORTS 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 Board of Mortgage Loan Originators to promulgate rules.
Section 4. 3-1-5 Responsibility to Submit NMLS Call Reports Section 5. Enforcement The statutory authorities for this rule, entitled 3-1-5 Responsibility to Submit NMLS Call Reports, are § § 12-61-903 (10) and 12-61-910.3, C.R.S.
Title V, section 1505(e), U.S.C. states that each mortgage loan originator licensee shall submit to the Nationwide Mortgage Licensing System and Registry (the "NMLS") reports of condition, which shall be in such form and shall contain such information as the NMLS may require. This rule applies to all state-licensed mortgage companies and all individuals required to be licensed pursuant to § § 12-61-902 and 12-61-903, C.R.S.
Section 4. 3-1-5 Responsibility to Submit NMLS Call Reports 1. Beginning January 1, 2012, all mortgage companies and mortgage loan originators must submit the NMLS Mortgage Call Report on a calendar quarterly basis in such form and shall contain such information as the NMLS may require.
2. 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.
3. If a mortgage company does not submit the NMLS Mortgage Call Report on behalf of their employed mortgage loan originators or other mortgage loan originators that operate through their company, an individualized NMLS Mortgage Call Report, as prescribed the NMLS, is required to be submitted by the individual mortgage loan originator.
4. 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.
5. Mortgage companies and mortgage loan originators must comply with any rules, policies and procedures relating to the submission of a Mortgage Call Report that are prescribed by the NMLS.
6. Failure to properly submit a NMLS Mortgage Call Report in a timely manner prescribed by the NMLS shall prevent the mortgage company and/or the individual mortgage loan originator from renewing their NMLS registration and state license.
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 4. 5-1-1 Mortgage Loan Originator Contracts Section 5. Enforcement 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.
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:
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 Colorado Attorney General, and to all persons who have requested to be advised of the intention of the Board of Mortgage Loan Originators to promulgate rules.
Section 3. Definitions Section 4. Applicability Section 5. 5-1-2 Mortgage Loan Originator Disclosures Section 6. Enforcement The Board of Mortgage Loan Originators adopts the following permanent rule entitled 5-1-2 Mortgage Loan Originator Disclosures , according to its statutory authority in section 12-61-910.3, C.R.S. The notice proposes to update rule 5-1-2. The rule establishes required disclosures for mortgage loan originators.
Section 12-61-914, C.R.S., requires mortgage loan originators, within three (3) business days after receipt of a loan application or any money 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 Board 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, as set forth in section 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.
Section 4. Applicability This rule applies to mortgage loan originators as that term is defined in section 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. 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 section 12-61-914(2), C.R.S., be disclosed within three (3) business days after receipt of a loan application or any money 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. A mortgage loan originator shall not charge any fee that inures to the benefit of the mortgage loan originator and the mortgage company for which they are an officer, partner, member, exclusive agent, contractor, independent contractor, or employee if such fee exceeds the fee disclosed on the previous written disclosure unless:
5. 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.
6. 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 loan originator or lender, and, if a lock-in agreement has not been entered, disclosure in a form acceptable to the Board 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.
7. 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 (4) years, for the purposes of inspection by the Board or authorized representative of the Board.
8. Mortgage loan originators shall provide completed disclosure forms to all borrowers within three (3) business days of completion. Furthermore, mortgage loan originators 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 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 Colorado Attorney General, and to all persons who have requested to be advised of the intention of the Board of Mortgage Loan Originators to promulgate rules.
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 section 12-61-910.3, C.R.S. This 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 material facts associated with the transaction. The Board has determined that individuals who operate with dual status licenses as real estate brokers and mortgage loan originators on the same transaction shall disclose this fact to the borrower. Additionally, this rule creates a new disclosure form that notifies borrowers of an individual’s dual status and of the borrower’s 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. This rule applies to all individuals required to be licensed pursuant to sections 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 Board 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 Board has determined that dual status is a material fact to real estate transactions and shall be disclosed to the borrower(s).
4. 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 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 Board.
5. 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 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 (4) years.
7. Furthermore, mortgage loan originators 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 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 Board or Mortgage Loan Originators to promulgate rules.
Section 3. Definitions Section 4. Applicability Section 5. 8-1-1 Mortgage Loan Originator Advertising Section 6. Enforcement The Board of Mortgage Loan Originators adopts the following rule entitled, 8-1-1 Mortgage Loan Originator Advertising, according to the authority 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 and mortgage companies.
Section 12-61-910.4, C.R.S., states the Board 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. While this rule incorporates provisions specific to nontraditional mortgage products, the requirements herein are applicable to all types of mortgage product advertisements.
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 mortgage loan originators and mortgage companies 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 mortgage companies as that term is defined in § 12-61-902(5), C.R.S. Section 5. 8-1-1 Mortgage Loan Originator Advertising 1. Mortgage loan originators and mortgage companies 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 and mortgage companies may review the Truth in Lending Act (Regulation
3. Mortgage loan originators and mortgage companies 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, mortgage loan originators and mortgage companies 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 a mortgage loan originator or a mortgage company advertises closed-end credit with a "triggering term," the mortgage loan originator and mortgage company 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. This includes all important terms that are advertised in ranges. The triggering terms for closed-end credit are:
5. If the ad for closed-end credit uses a triggering term, it also must include the following information:
6. If the 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." The 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 the ad only shows 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 it advertises 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. For the purpose of section 5, subsections sixteen (16) through twenty-one (21) of this rule, the requirements set forth in this rule do not apply to:
16. All advertisements shall have at least one (1) responsible person that is accountable. If the responsible party is an individual, their Colorado license number and their registration number approved on the Nationwide Mortgage Licensing System and Registry (the “NMLS” ) shall be clearly and conspicuously included in the advertisement. If the responsible party is a mortgage company, the company shall clearly and conspicuously include their NMLS approved registration number on all advertisements.
17. All advertisements shall clearly and conspicuously provide the following information:
18. All advertisements shall clearly and conspicuously include the following statement:
19. 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.
20. Advertisements containing an interest rate, payment rate, teaser rate or annual percentage rate must clearly and conspicuously include all material terms and conditions specific to the rates advertised. Material terms and conditions include, but are not limited:
21. Advertisements promoting non-traditional mortgage products, as defined in this rule, must clearly and conspicuously 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.
Rule 5-1-2 eff. 06/14/2010.
Rules 1-1-5, 5-1-1, 8-1-1 eff. 02/14/2011; Repealed 1-1-1 eff. 02/14/2011. Rules 1-2-2, 1-3-1, 1-4-1, 3-1-4 eff. 03/17/2011.
Rules 1-5-1, 3-1-1, 3-1-3, 7-1-1 eff. 04/14/2011.
Rules 1-1-2, 3-1-2, 5-1-2 eff. 05/15/2011.
Rules 1-1-6, 1-1-7, 3-1-5 eff. 08/14/2011.
Rule 8-1-1 eff. 10/15/2011.
Rule 1-1-6 Repealed eff. 03/30/2012.
Rule 1-4-1 eff. 5/15/2012.
Rules 1-1-8, 8-8-1 eff. 07/15/2012.