Press Release - Dec 17, 2007
OFFICE OF GOVERNOR BILL RITTER, JR.
FOR IMMEDIATE RELEASE
MONDAY, DEC. 17, 2007
CONTACTS
Erin Toll, 303.894.2132
Evan Dreyer, 720.350.8370
GOV. RITTER SEEKS TO STEM FORECLOSURE EPIDEMIC
Concerned that high prepayment penalties on mortgage loans will lead to an additional round of foreclosures in Colorado, Gov. Bill Ritter is seeking aggressive implementation of the new Mortgage Broker Registration Act he signed into law in June.
"Colorado continues to struggle with an exceedingly high foreclosure rate, and my administration is working hard to protect homeowners and communities," Gov. Ritter said. "Implementing this legislation is one more important step. Solving this crisis will involve industry and government working together."
The Mortgage Broker Registration Act includes four mortgage-fraud and foreclosure-prevention bills signed by Gov. Ritter in June. The bills are:
HB 1322 (Marshall/Groff), "Mortgage Fraud Prevention Act"
SB 85 (Veiga/Massey), "Protect Consumer Real Estate Transactions"
SB 216 (Veiga/Marshall), "Mortgage Loan Acts Practices"
SB 203 (Groff/Marshall), "Mortgage Broker Licensing"
Regarding the need for aggressive enforcement of the Mortgage Broker Registration Act, borrowers are increasingly lured into adjustable rate mortgage products that initially have very low monthly payments. When their rates increase, they may find stiff prepayment penalties if they attempt to pay off their loan by selling their home or refinancing. Their only option is foreclosure. As a result, Gov. Ritter requested a solution from Division of Real Estate Director Erin Toll, who is charged with implementing and enforcing the new law.
Acting on the concerns of Gov. Ritter as well as those of consumer groups and members of the legislature, Director Toll has issued an emergency rule restricting prepayment penalties on mortgage loans. The new rule prohibits prepayment penalties that extend past the adjustment date of an interest rate, teaser rate or payment rate. The borrower's payment virtually always significantly increases on the adjustment date. The rule creates a presumption that a mortgage broker has violated their duty of good faith to the borrower if they recommend a loan product with a prepayment penalty that extends beyond the adjustment date. The rule took effect Friday.
"Prepayment penalties can trap families in no-win situations where foreclosure becomes the only option," said state Rep. Rosemary Marshall, who sponsored mortgage-related legislation the past two years. "I wholeheartedly support the Division of Real Estate's new rule implementing the mortgage broker legislation I sponsored during the last session. I believe it will help lenders and consumers keep their mortgage contracts alive."
Since taking over the Division of Real Estate last year, Director Toll has made tackling Colorado's mortgage fraud and foreclosure epidemic the Division's top priority. "Along with our aggressive enforcement actions against those who participate in unlawful actions that encourage foreclosures, this is another step to attempt to stem the wave of foreclosures," she said.
The Division's enforcement actions include imposing permanent license revocations along with record fines against real estate appraisers and real estate brokers who engage in activities leading to higher foreclosure rates.
For more information, visit the Division's website at www.dora.state.co.us/real-estate