DEPARTMENT OF REGULATORY AGENCIES

DIVISION OF REAL ESTATE

MORTGAGE LOAN ORIGINATORS

4CCR 725-3

NOTICE OF PROPOSED RULEMAKING HEARING
June 15, 2011

1-1-6 RESIDENTIAL MORTGAGE LOANS

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. 	Applicability
Section 4. 	1-1-6 Residential Mortgage Loans
Section 5. 	Enforcement

Section 1. 	Authority

The statutory basis for this rule, entitled Licensure for Individuals Engaged in Origination 
Activities on Investment Properties and other Similar Types of Lending for Properties of Four or Fewer Units, is § 12-61-910.3, C.R.S.

The notice proposes to add rule 1-1-6 Residential Mortgage Loans.  The rule requires licensure for individuals that engage in loan origination activities on investment properties and other similar forms of lending.

Section 2.	Scope and Purpose

The purpose of this rule is to clarify the licensing requirement for individuals who originate residential mortgage loans on properties of four or fewer residential units.

A residential mortgage loan is defined in section 12-61-902(8), C.R.S., as:

“. . . a loan that is primarily for personal, family, or household use and that is secured by a mortgage, deed of trust, or other equivalent, consensual security interest on a dwelling or residential real estate upon which is constructed or intended to be constructed a single-family dwelling or multiple-family dwelling of four or fewer units.”  

The Division of Real Estate interprets this definition to include loans secured by a residential property of four or fewer units that is intended for development, rehabilitation, resale, or rental of such property. 

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.	1-1-6 Residential Mortgage Loans

1.	A residential mortgage loan that is secured by a mortgage deed of trust, or other equivalent consensual security interest on a dwelling or residential real estate upon which is constructed or intended to be constructed a residential property of four or fewer units includes, but is not limited to:

a.	A loan whereupon the residential property is used, or intended for use as, a rental property.   
b.	A loan whereupon the residential property is used, or intended for, development or rehabilitation purposes.
c.	A loan whereupon the residential real estate is used, or intended for, construction of a property of four or fewer residential units.
d.	A loan whereupon the residential property is purchased to be resold. 

2.	Individuals who take loan applications for, or who offer or negotiate terms of residential mortgage loans, as defined in section 4, subsection 1 of this rule, meet the definition of a mortgage loan originator pursuant to Colorado law and are required to be licensed as state-licensed loan originators, as this term is defined in section 12-61-902(11), C.R.S., pursuant to section 12-61-903, C.R.S.  Additionally, all such persons are required to comply with all provisions defined in the Mortgage Loan Originator Licensing and Mortgage Company Registration Act and all rules promulgated by the Board of Mortgage Loan Originators.

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.	Cease and desist order;

b.	Permanent injunction;

c.	Imposition of fines; and 

d.	Restitution for any financial loss.

A hearing on the above subject matter will be held on Wednesday, June 15, 2011, at the Colorado Division of Real Estate, 1560 Broadway, Suite 1250A, 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.