Colorado Repeals Various Provisions and Adopts New Amended Provisions Regarding Professional Standards and Mortgage Call Reports
by: Lee Greenberg
The Colorado Division of Real Estate recently repealed several provisions and adopted new amended provisions in their place regarding the professional standards of Mortgage Loan Originators and Mortgage Companies. In addition, the Division of Real Estate updated its provisions regarding call reports under the NMLS. The new legislation becomes effective on November 14, 2013 with the exception of the repealed rules pertaining to prepayment penalties, which are effective on January 10, 2014.
Provisions Regarding Professional Standards
Under the new legislation, individuals who take residential loan modification applications or offer loan modifications are required to be licensed as a Colorado mortgage loan originator. All such individuals are required to use a loan modification contract at the time of application which complies with the Mortgage Loan Originator Licensing Act and the Foreclosure Protection Act. A suggested form for the contract can be found on the Division of Real Estate’s website.
The new law requires mortgage loan originators to have all borrowers describe, in writing, the reason they are seeking a mortgage loan, a loan modification or to refinance an existing mortgage loan. The law demands that a mortgage loan originator only recommend appropriate products after making a reasonable inquiry, in order to understand a borrower’s current and prospective financial status. A mortgage loan originator makes a reasonable inquiry, upon interviewing and discussing with all applicable borrowers all sections contained in the Uniform Residential Loan Application, and upon completion of a tangible net benefit disclosure.
The reasonable, tangible net benefit standard depends on the totality of the facts and circumstances relating to a specific transaction. When determining a reasonable, tangible net benefit, a mortgage loan originator should account for and discuss with prospective borrowers the following considerations: lower payments; condensed amortization schedule; debt consolidation; cash out; avoiding foreclosure; negative amortization; balloon payments; variable rates; interest only options; prepayment penalties; and hybrid mortgage products. A suggested disclosure form regarding reasonable, tangible net benefit, can be found on the Division of Real Estate’s website. The mortgage loan originator is required to complete the disclosure with the borrower(s) at the time of completing a loan application. A tangible net benefit disclosure must also be completed with the borrower(s) prior to the borrower(s) signing loan closing documents if the reasonable, tangible net benefit has changed.
The adopted law mandates mortgage loan originators and mortgage companies to respond and provide requested documents for investigations to the Board. Mortgage companies are required to maintain any and all documents collected and provided for the purpose of negotiating and originating residential mortgage loans for a period of four years. Also, mortgage companies and mortgage loan originators are required to maintain any and all documents used for the purpose of soliciting borrowers that were made by the mortgage company or mortgage loan originator. Moreover, mortgage loan originators are required to maintain all current contact information and all information required for licensing, including on the Division of Real Estate Database and on the NMLS.
Finally, the law contains several provisions concerning disclosure requirements of mortgage loan originators. Under the law, mortgage loan originators are required to keep records of all applicable disclosures for a period of four years, for the purposes of inspection by the Board or authorized representatives of the Board.
Provisions Regarding NMLS Mortgage Call Reports
The legislation requires all mortgage companies to submit the NMLS mortgage call report on a calendar quarterly basis. Mortgage companies must identify and complete the call report on behalf of all employed mortgage loan originators or other mortgage loan originators that operate through their company. The report is due within 45 days of the end of the quarter and the financial condition report of the standard section is due annually 90 days from the company’s fiscal year end. In addition, mortgage companies must comply with any rules, policies and procedures relating to the submission of a mortgage call report that are prescribed by the NMLS. Failure to submit a call report in a timely manner will prevent the mortgage company from renewing their NMLS registration.
Anna DeSimone founded Bankers Advisory in 1986 and is a nationally recognized authority in residential mortgage lending. She has received numerous industry awards and has authored more than 40 best practices guides and hundreds of articles.
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