Gov. Bill Owens on Friday signed a bill requiring mortgage brokers to submit to criminal background checks and register with the state by Jan. 1.
The bill also requires posting of a $25,000 surety bond, and people who have been convicted of fraud in the past five years will be denied licenses.
Failure to register will be a misdemeanor, and each mortgage brokered by an unregistered person will be a separate violation.
Colorado was one of two states that did not regulate the industry. Alaska is the other.
Mortgage brokers act as intermediaries between consumers and lenders during mortgage transactions. A mortgage broker originates loans, while a mortgage lender finances the loans.
The Colorado Association of Mortgage Brokers, which represents people who originate home and commercial loans, has long advocated that brokers be registered or licensed.
“For the first time, we’ll be able to get a lot of people out of the industry that shouldn’t be collecting information from home owners that can be used to steal their identity,” said Scott Meiklejohn, executive director of the association.
“We’ll get rid of all the people who have come into this state from other states who have lost their licenses and clean up the industry some.”
The Colorado Association of Mortgage Lenders, however, has said regulating mortgage brokers will do little to stop mortgage fraud.
“Since no state can regulate all loan originators, the only way to effectively attack mortgage fraud is through enforcement,” said Chris Holbert, president of the mortgage lenders group. “Until we treat criminals as criminals, regulating some of the good guys isn’t going to help. Enforcement is the key.”
Staff writer Margaret Jackson can be reached at 303-820-1473 or mjackson@denverpost.com.
