A backlog in criminal-background checks of mortgage brokers under a new state law could leave some unable to do business for weeks or months after the first of the year.
The state has received fingerprints from about 3,800 brokers who must clear criminal-background checks to stay in business after Jan. 1, according to the Colorado Bureau of Investigation. It can take up to three months to finish the registration process. That potentially leaves thousands more who have not submitted prints unable to arrange home loans for their customers at the start of the year as they wait to be cleared.
There are an estimated 5,000 to 8,000 mortgage brokers in the state, though no one knows for sure because there has never previously been any regulation or registration. Brokers handle an estimated 70 percent of the mortgages made in the state.
Jason Berman, president of the Colorado Association of Mortgage Brokers, said he expects as many as 8,000 brokers to apply. Many of those will have to wait early next year until their background checks clear.
“Inevitably, there are always people who wait until the last minute,” he said. “Those are the folks who are going to call us and say, ‘They’re not letting me do a loan.”‘
Originally, the state said any broker working for Federal Housing Administration-approved lenders would not need to register. But in August, the state changed that position and said brokers who work as contractors for those lenders need to register.
CBI spokesman Lance Clem said the background checks are taking eight to 10 weeks to complete. “We have programs in place to shorten it, but that’s what it is now,” he said. The CBI has already brought the backlog down from 12 weeks.
“It’s taking them a long time,” said Erin Toll, director of the Colorado Division of Real Estate, which has a staff of 35 and oversees the registration. “We’re telling brokers to get their fingerprints in as soon as possible and to register as soon as possible, just in case there’s a problem.”
Brokers must submit an application, clear the background check, pay a fee and post a surety bond of $25,000. Fingerprints have been accepted since July, and registrations can’t be completed until the background check is done. Those with theft, fraud or other serious convictions during the past five years, or those who have lost their mortgage-brokerage licenses in other states, won’t be registered and can’t legally make loans.
The division began accepting online applications from brokers this month at www.dora.state.co.us/real-estate/mb. Toll said the state’s electronic system for taking applications can handle a potential rush near the end of the year.
Staff writer Greg Griffin can be reached at 303-954-1241 or ggriffin@denverpost.com.
