Colorado Attorney General John Suthers said this week he opposes a push to license mortgage brokers, saying the legislation is poorly written.
As of Jan. 1, mortgage brokers were required to register with the state, undergo a criminal- background check and post a bond, under legislation passed last year. About 5,000 mortgage brokers have registered under the state system.
Senate Bill 203, sponsored by Sen. Peter Groff, D-Denver, would require mortgage brokers to obtain licenses and would give the Colorado Division of Real Estate greater powers to suspend or revoke those licenses, which can’t be easily done under the registration system.
The FBI recently ranked Colorado among the 16 states with the highest incidences of mortgage fraud last year. The move to regulate brokers is one attempt to stem fraudulent loans that may contribute to Colorado’s high foreclosure rate.
But at a luncheon gathering of the Colorado Association of Mortgage Brokers on Tuesday, Suthers said Groff’s legislation doesn’t define what would be required under a licensing regime.
Furthermore, he said other states high on the FBI’s fraud list have full licensing requirements and still suffer from mortgage fraud.
He said he expects the licensing legislation to be defeated. Groff was not available for comment.
Suthers also spoke about HB 1322, sponsored by Rep. Rosemary Marshall, D-Denver. That would require stiffer penalties for deceptive mortgage advertising and would require brokers to make loans suitable to a homebuyer’s ability to repay.
Suthers wants to eliminate a loophole in the proposed legislation that leaves more than 10,000 loan officers working with financial institutions and Federal Housing Administration-approved lenders exempt from state oversight.
“We think the FHA exemption is too broad,” Suthers said.
Suthers said he also doesn’t like that the Groff and Marshall bills were kept under wraps until their introduction in late February.
“I’m not sure this rush is appropriate, given that this has not been vetted,” he said.
Marshall was not available for comment.
Industry groups are opposed to both of the bills as originally written, with the Colorado Mortgage Lenders describing them as an “overfix” to the state’s high foreclosure rate.
The Colorado Division of Housing recently reported that foreclosures in the state doubled between 2003 and 2006. In Adams County, the hardest-hit area, 3 percent of all households went into foreclosure last year.
“We are working with Sen. Groff and Rep. Marshall to make their bills positive steps for Colorado,” said Nate Strauch, a spokesman for the attorney general’s office.
Suthers is backing SB 85, proposed by Sen. Jennifer Veiga, D-Denver. That bill would make it a crime for a mortgage broker to influence or coerce a real-estate appraiser – or for an appraiser to submit a fraudulent appraisal.
Suthers’ office also is expected to announce the results of an investigation against deceptive advertising by mortgage lenders.
Staff writer Aldo Svaldi can be reached at 303-954-1410 or asvaldi@denverpost.com.
