DEPARTMENT OF REGULATORY AGENCIES

DIVISION OF REAL ESTATE

MORTGAGE LOAN ORIGINATORS

4CCR 725-3

7-1-1 DUAL STATUS DISCLOSURE

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 Colorado Attorney General, and to all persons who have requested to be advised of the intention of the Board of Mortgage Loan Originators to promulgate rules.

Section 1.	Authority
Section 2.	Scope and Purpose
Section 3.	Applicability
Section 4.	7-1-1 Dual Status Disclosure
Section 5. 	Enforcement

Section 1.	Authority

The statutory basis for this rule, entitled 7-1-1 Dual Status Disclosure, is section 12-61-910.3, C.R.S.

This notice proposes to update rule 7-1-1.  The rule requires mortgage loan originators to inform borrowers if they are also acting as the real estate broker on their transaction.

Section 2.	Scope and Purpose

Colorado statutes require mortgage loan originators, before providing mortgage services to the borrower, to disclose all material facts associated with the transaction.  The Board has determined that individuals who operate with dual status licenses as real estate brokers and mortgage loan originators on the same transaction shall disclose this fact to the borrower.  Additionally, this rule creates a new disclosure form that notifies borrowers of an individual’s dual status and of the borrower’s right to shop for alternate services.

The purpose of this rule is to clearly notify mortgage loan originators that their dual status as a real estate broker and a mortgage loan originator must be disclosed to the borrower.  Furthermore, this rule establishes a disclosure form mortgage loan originators may use to disclose such relevant information.

Section 3.	Applicability

This rule applies to all individuals required to be licensed pursuant to sections 12-61-902 and 12-61-903, C.R.S. 

Section 4.	7-1-1 Dual Status Disclosure

1.	Colorado law, specifically section 12-61-912, C.R.S., provides that a mortgage loan originator shall not act as a loan originator in any transaction in which (a) the mortgage loan originator acts or has acted as a real estate broker or salesperson; or (b) another person doing business under the same licensed real estate broker acts or has acted as a real estate broker or salesperson, unless the mortgage loan originator first makes a full and fair disclosure to the borrower of all material features of the loan product and all facts material to the transaction, in addition to any other disclosures required by law.  Additionally, the mortgage loan originator must maintain his or her mortgage loan originator business activities and mortgage loan originator business records separate and apart from the real estate broker activities. 

2.	The Board prohibits individuals from acting as a mortgage loan originator and real estate broker, or real estate salesperson, on the same transaction unless they comply with this rule.  

3.	The Board has determined that dual status is a material fact to real estate transactions and shall be disclosed to the borrower(s). 
 
4.	The Board has created the Colorado Dual Status Disclosure Form to ensure this information is clearly and concisely disclosed.  This disclosure may be found on the Division of Real Estate’s website at http://www.dora.state.co.us/real-estate/mortgage/MBForms.htm.  Mortgage loan originators shall use this form or an alternate form, if such alternate form clearly includes all information required on the suggested form, as determined by the Board.

5.	The Colorado Dual Status Disclosure form shall be completed, disclosed, and provided to the borrower within three (3) business days after receipt of a loan application or any moneys from a borrower.

6.	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 the disclosure form defined by this rule for a period of four (4) years.

7.	Furthermore, mortgage loan originators must be able to provide proof to the Board or an authorized representative of the Board that the disclosure forms defined in this rule were in fact provided to the borrower within three (3) business days of completion.

Section 5. 	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.