A state licensing bill for mortgage brokers passed a Senate committee Monday with amendments designed to win wider support.
The State, Veterans & Military Affairs Committee passed the bill on a 3-2 vote that split along party lines. It now moves to the Senate Appropriations Committee for consideration there.
“We are trying to figure out a way to corral the growing foreclosure numbers that are swamping the state,” said Sen. Peter Groff, D-Denver, the bill’s sponsor.
Colorado recorded more than 28,000 foreclosures last year despite decreasing unemployment, historically the largest driver of foreclosures.
Homeowners testified of being duped into taking mortgages that carried prepayment penalties and interest rates that quickly escalated.
Sen. Chris Romer, D-Denver, said the placement of borrowers in inappropriate loans by mortgage providers would be a nonstarter in the securities business.
“You either clean your own house or you have someone clean it for you. I think it is time to clean the house,” Romer said before calling for a vote on the measure.
Attorney General John Suthers, initially concerned about vague language within the original bill, swung to become a supporter after more details were provided on what licensing would entail.
“The attorney general is convinced there is a place in Colorado for the kind of education requirements, testing and minimum competency that this type of licensure will allow,” said Jan Zavislan, deputy attorney general for consumer protection.
Bankers, credit unions, Realtors and title agents also threw their support behind the measure.
The Colorado Mortgage Lenders Association remained opposed, arguing that licensing hasn’t proved effective in reducing fraud in other states, could make mortgages harder to obtain and would favor banks and other financial institutions exempt from regulation over independent lenders.
