DEPARTMENT OF REGULATORY AGENCIES
DIVISION OF REAL ESTATE
MORTGAGE LOAN ORIGINATORS AND MORTGAGE COMPANIES
4CCR 725-3

NOTICE OF PROPOSED PERMANENT RULEMAKING HEARING
November 20, 2013

1-3-1 ERRORS AND OMISSIONS INSURANCE FOR MORTGAGE LOAN ORIGINATORS

Section 1.	Authority
Section 2. 	Scope and Purpose
Section 3.	Applicability
Section 4. 	1-3-1 Errors and Omissions Insurance for Mortgage Loan Originators
Section 5.	Enforcement

Section 1. 	Authority

The Board of Mortgage Loan Originators (the “Board”) updates the following permanent rule entitled, 1-3-1 Errors and Omissions Insurance for Mortgage Loan Originators, according to the authority prescribed in §§ 12-61-903.5 and 910.3, C.R.S.

The notice proposes to update rule 1-3-1.  The rule establishes errors and omissions coverage for mortgage loan originators.

Section 2.	Scope and Purpose

Section 12-61-903.5, C.R.S., requires the Board to determine the terms and conditions of coverage required, including the minimum limits of coverage, the permissible deductible, and permissible exemptions.  The purpose of this rule is to define the requisite errors and omissions coverage.

Section 3.	Applicability

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

Section 4.	1-3-1 Errors and Omissions Insurance for Mortgage Loan Originators

1.	Mortgage loan originators are deemed compliant with the errors and omissions insurance requirements if their errors and omissions insurance meets the requirements defined in one of the following three options:

a.	Option 1 – Mortgage loan originators, at a minimum, may acquire and maintain individual errors and omissions insurance in their own name with the following terms of coverage:

i.	The contract and policy are in conformance with all relevant Colorado statutory requirements;

ii.	Coverage includes all acts for which a mortgage loan originator license is required, except those illegal, fraudulent, or other acts which are normally excluded from such coverage;

iii.	Coverage shall encompass all types of transactions conducted by the mortgage loan originator and shall be in the individual mortgage loan originator’s name; 

iv.	Coverage is for not less than $100,000.00 for each licensed individual per covered claim, with an annual aggregate limit of not less than $300,000.00 per licensed individual; and

v.	Coverage contains a deductible no greater than $1,000.00, or a deductible no greater than $20,000.00 for policies that primarily insure reverse mortgage transactions.

b.	Option 2 – Mortgage loan originators who are employees or exclusive agents for companies with less than 20 individuals who are required to be licensed pursuant to the current Colorado mortgage loan originator licensing laws and who do not work for more than one company, may, at a minimum, operate under the company’s errors and omissions insurance policy if the policy meets the following terms of coverage:

i.	The contract and policy are in conformance with all relevant Colorado statutory requirements;

ii.	Coverage includes all acts for which a mortgage loan originator license is required, except those illegal, fraudulent, or other acts which are normally excluded from such coverage;

iii.	Coverage shall include all activities contemplated under current Colorado mortgage loan originator licensing laws and states this in the policy;

iv.	Coverage shall encompass all types of transactions conducted by all of the mortgage loan originators employed at the company or by all mortgage loan originators who are exclusive agents of the company;

v.	Coverage is for not less than $1,000,000.00 per covered claim, with an annual aggregate limit of not less than $2,000,000.00 that is exclusive to Colorado consumers; and

vi.	Coverage contains a deductible no greater than $50,000.00.

c.	Option 3 – Mortgage loan originators who are W-2 employees or exclusive agents for companies with 20 or more employees and who do not work for more than one company, may, at a minimum, operate under the company’s errors and omissions insurance policy if the policy meets the following terms of coverage:

i.	The contract and policy are in conformance with all relevant Colorado statutory requirements;

ii.	Coverage includes all acts for which a mortgage loan originator license is required, except those illegal, fraudulent, or other acts which are normally excluded from such coverage;

iii.	Coverage shall include all activities contemplated under current Colorado mortgage loan originator licensing laws and states this in the policy;

iv.	Coverage shall encompass all types of transactions conducted by all of the mortgage loan originators employed at the company or by all mortgage loan originators who are exclusive agents of the company;

v.	Coverage shall encompass all types of transactions conducted by all of the mortgage loan originators employed at the company;

vi.	Coverage is for not less than $1,000,000.00 per covered claim, with an annual aggregate limit of not less than $4,000,000.00 that is exclusive to Colorado consumers; and

vii.	Coverage contains a deductible no greater than $100,000.00.

2.	Regarding company errors and omissions insurance policies, the company shall provide the Board, or an authorized representative of the Board, with any and all requested errors and omissions insurance policies relevant to this rule or current Colorado mortgage loan originator licensing laws and shall verify and provide adequate proof regarding the timeline of employment for each individual operating under such company policy.  Failure on the part of the company to provide such information shall result in non-compliance regarding the errors and omissions insurance requirement for individual licensees operating under the  company’s errors and omissions insurance policy.

3.	Mortgage Loan originators shall use the Mortgage Loan Originator Licensing Update Form to ensure their errors and omissions insurance information is current and clearly and concisely disclosed.  This form may be found on the Division of Real Estate’s website at http://www.dora.state.co.us/real-estate/mortgage/MBForms.htm.  

a.	Mortgage loan originators may forward this form by mail or personal delivery to the following address:

i.	Division of Real Estate – Attn: Mortgage Loan Originator Licensing Department
1560 Broadway, Suite 925
Denver, CO. 80202

4.	Additionally, mortgage loan originators may update all of the information required in this rule electronically.  They may access their information through the following website: https://eservices.psiexams.com/index_login.jsp.  After entering their password and username, mortgage loan originators may update all information without any fees or costs associated with such action.

5.	For information regarding errors and omissions insurance providers, visit the Division of Real Estate’s website at http://www.dora.state.co.us/real-estate/index.htm. 

6.	Applicants for licensure, renewal, and reinstatement shall comply with this rule and § 12-61-903.5, C.R.S., in a manner prescribed by the Board.  Any licensee who so fails to obtain and maintain errors and omissions insurance coverage in accordance with this rule or fails to provide proof of continuous coverage shall be subject to disciplinary action.

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. [REPEALED]

A hearing on the above subject matter will be held on Wednesday, November 20, 2013, at the Colorado Division of Real Estate, 1560 Broadway, Suite 1250-C, Denver, Colorado 80202 beginning at 9:00 a.m. 

Any interested person may participate in the rule making through submission of written data, views and arguments to the Division of Real Estate.  Persons are requested to submit data, views and arguments to the Division of Real Estate in writing no less than ten (10) days prior to the hearing date and time set forth above. However, all data, views and arguments submitted prior to or at the rulemaking hearing or prior to the closure of the rulemaking record (if different from the date and time of hearing), shall be considered.

Please be advised that the rule being considered is subject to further changes and modifications after public comment and formal hearing.