DEPARTMENT OF REGULATORY AGENCIES

DIVISION OF REAL ESTATE

MORTGAGE LOAN ORIGINATORS

4CCR 725-3

3-1-2 MORTGAGE LOAN ORIGINATORS’ DUTY TO RESPOND AND PROVIDE REQUESTED DOCUMENTS FOR INVESTIGATIONS

Pursuant to and in compliance with Title 12, Article 61 and Title 24, Article 4, C.R.S. as amended, notice of proposed rulemaking is hereby given, including notice to the Attorney General of the State of Colorado, and to all persons who have requested to be advised of the intention of the Director of the Colorado Division of Real Estate to promulgate rules.

Section 1.	Authority
Section 2.	Scope and Purpose
Section 3. 	Definitions
Section 4.	Applicability
Section 5.	3-1-2 Mortgage Loan Originators’ Duty to Respond and Provide Requested Documents for Investigations
Section 6. 	Enforcement
Section 7. 	Effective Date

Section 1.	Authority

The statutory basis for this rule, entitled Mortgage Loan Originators’ Duty to Respond and Provide Requested Documents for Investigations, is § 12-61-910.3, C.R.S.

The notice proposes to update rule 3-1-2.  The rule establishes that mortgage loan originators have a duty to respond and provide requested documentation for investigations.

Section 2.	Scope and Purpose

Section 12-61-905(7)(b), C.R.S., states the Director of the Division of Real Estate, upon his or her own motion may, and, upon the complaint in writing of any person, shall, investigate the activities of any licensee or any person who assumes to act in such capacity within the state.  Section 12-61-905.5(1)(k), C.R.S. requires mortgage loan originators to maintain possession, for the future use or inspection by an authorized representative of the Director, for a period of four years, of the documents or records prescribed by the rules of the Director or to produce such documents or records upon reasonable request by the Director or by an authorized representative of the Director.  The purpose of this regulation is to define what documents should be retained for a period of four years and to require mortgage loan originators or other persons who assume to act in such capacity within the state to provide a written response and all requested documents to the Director or an authorized representative of the Director.  Additionally, this regulation prescribes the time period in which all persons and entities shall respond to Director inquiries, including, but not limited to, document and information requests during investigations of complaints or any other investigation conducted for the purpose of determining compliance with Colorado mortgage loan originator law.

Section 3. 	Definitions

1.	“Secure environment” means a system which implements the controlled storage and use of information.

Section 4.	Applicability

This rule applies to mortgage loan originators as that term is defined in § 12-61-902(6), C.R.S. and includes those persons who originate a mortgage, offer to originate a mortgage, act as a mortgage loan originator, or offer to act as a mortgage loan originator.  This rule applies to all individuals required to be licensed pursuant to §§ 12-61-902 and 12-61-903, C.R.S. 

Section 5.	3-1-2 Mortgage Loan Originators’ Duty to Respond and Provide Requested Documents for Investigations

1.	Persons who originate a mortgage, offer to originate a mortgage, act as a mortgage loan originator, or offer to act as a mortgage loan originator and all individuals required to be licensed shall provide the Director or his or her authorized representative with all information required by this rule.  

a.	Failure to provide all information requested by the Director or his or her authorized representative within the time set by the Director, or authorized representative of the Director, shall be grounds for disciplinary action and grounds for the imposition of fines unless the Director, or authorized representative of the Director, has granted an extension of time for the response.  

i.	Persons who originate a mortgage, offer to originate a mortgage, act as a mortgage loan originator or offer to act as a mortgage loan originator may ask for an extension of time to comply if:

1.	The request is done so in writing; and

2.	The request is received by the Director or authorized representative of the Director prior to the expiration date defined in the notification letter sent by the Director or authorized representative of the Director.

ii.	Any and all extensions granted are done so at the discretion of the Director or authorized representative of the Director.

b.	Failure to provide all requested information shall be grounds for disciplinary action and grounds for the imposition of fines regardless of whether the underlying complaint results in further investigation or subsequent action by the Director.

2.	The response from the person shall contain the following:

a.	If requested in the notification letter, a complete and specific answer to the factual recitations, allegations or averments made in the complaint filed against the licensee, whether made by a member of the public or on the Director’s own motion or by an authorized representative of the Director;

b.	A complete and specific response to all questions, allegations or averments presented in the notification letter; and

c.	Any and all documents or records requested in the notification letter.

3.	Persons who originate a mortgage, offer to originate a mortgage, act as a mortgage loan originator, or offer to act as a mortgage loan originator shall maintain any and all documents collected, gathered and provided for the purpose of negotiating and originating residential mortgage loans for a period of four years.  Additionally, persons who originate a mortgage, offer to originate a mortgage, act as a mortgage loan originator or offer to act as a mortgage loan originator shall maintain any and all documents used for the purpose of soliciting or marketing borrowers.  These documents include, but are not limited to:

a.	All Uniform residential loan applications (Form 1003);

b.	All required state and federal disclosures;

c.	Asset statements;

d.	Income documentation;

e.	Verification of employment;

f.	Verification of deposit;

g.	Lender submission forms;

h.	Advertisements;

i.	Flyers;

j.	HUD-1 Settlement Statements;

k.	Uniform Underwriting and Transmittal Summary(Form 1008); and

l.	Credit report. 

4.	All documents shall be kept in a secure environment.  Electronic storage is acceptable as long as the information is accessible and kept in a secure environment. 

5.	The company for whom the mortgage loan originator is an officer, partner, contractor, independent contractor, member, exclusive agent or an employee may provide the requested documents to the Director.  However, the mortgage loan originator is responsible for compliance with the Director’s request and is subject to disciplinary action if the company fails or refuses to provide the requested documentation.  

Section 6. 	Enforcement

1.	Noncompliance with this rule, whether defined or reasonably implied in the rule, may result in the imposition of any of the sanctions allowable under Colorado law, including, but not limited to:

a.	Revocation;

b.	Refusal to renew a license;

c.	Imposition of fines; and 

d.	Restitution for any financial loss.

Section 7.	Effective Date

This permanent rule shall be effective August 6, 2009.