Stricter enforcement of existing laws alone won’t resolve the state’s rising tide of foreclosures, according to testimony provided to state legislators Monday.
“You will not eliminate our foreclosure problem in Colorado by eliminating mortgage fraud,” Colorado Attorney General John Suthers testified before a joint hearing of the House Business Affairs and Labor and the Senate Business, Labor and Technology committees.
Legislators should consider implementing “suitability” rules for mortgage providers so they offer borrowers loans that are appropriate to their situation, Suthers advised.
Stockbrokers and insurance agents already fall under such requirements. Suthers also encouraged simplifying the mortgage process, eliminating misleading mortgage ads and increasing homebuyer education.
Democratic Rep. Rosemary Marshall and State Senate President Pro Tem Peter Groff are crafting legislation to address the state’s high number of foreclosures.
Suthers’ office, meanwhile, is backing legislation that would make pressuring an appraiser or submitting a false appraisal a serious crime.
The Denver metro area posted a record number of foreclosures in 2006. The Denver Post analyzed the foreclosure wave in a 10-part series, “Foreclosing on the American Dream.”
Mortgage brokers said at Monday’s hearing that consumers should shoulder their share of blame for foreclosures.
Rising foreclosures reflect higher rates of homeownership and consumers’ desire for instant gratification, argued Bill Kidwell, president-elect of the Colorado Association of Mortgage Brokers.
“As we increase homeownership, we will increase the number of foreclosures,” he said.
Many borrowers no longer wait until they save enough money for a down payment before buying a home, Kidwell said.
Americans should be willing to accept a “baseline” rate of foreclosures, like the country is willing to accept a certain level of unemployment, he said.
His recommendation: Create a blue-ribbon panel to study the foreclosure issue before crafting legislative remedies.
Marshall conceded that solid data on the causes of foreclosure are hard to come by, but she said consumer complaints against mortgage providers are on the rise.
“We have information that there is a lot of unscrupulous behavior in the business,” she said.
Proving fraud is hard when consumers sign a foot-thick stack of documents they don’t read, much less understand, consumer advocates testified.
A better approach would be to define unfair trade practices, said Cameron Graham, representing AARP.
A growing number of seniors are getting trapped in mortgage loans they don’t understand, Graham said.
Rex Wilmouth, state director of the Colorado Public Interest Research Group, linked the rise in foreclosures to loan brokers and originators who quickly sell mortgages to outside investors.
Staff writer Aldo Svaldi can be reached at 303-954-1410 or asvaldi@denverpost.com.
