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

NOTICE OF PROPOSED PERMANENT RULEMAKING HEARING
September 18, 2013

CHAPTER 1:	Definitions

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 Colorado Board of Mortgage Loan Originators (the “Board”) to promulgate rules, or to amend, repeal or repeal and re-enact the present rules of the Board.

STATEMENT OF BASIS

The statutory basis for the rules titled Rules of the Board of Mortgage Loan Originators is Part 9 of Title 12, Article 61, Colorado Revised Statutes, as amended.  

STATEMENT OF PURPOSE

The purpose of this rule is to effectuate the legislative directive to promulgate necessary and appropriate rules in conformity with the state statutes of the Mortgage Loan Originator Licensing and Mortgage Company Registration Act.

SPECIFIC PURPOSE OF THIS RULEMAKING

The purpose of this rule is to define terms pertaining to the practices of mortgage loan originators and mortgage companies.  

Proposed New, Amended and Repealed Rules

[Deleted material shown struck through, new material shown ALL CAPS. Rules, or portions of rules, which are unaffected are reproduced.  Readers are advised to obtain a copy of the complete rules of the Board at www.dora.state.co.us/real-estate/.

CHAPTER 1:	Definitions

1.1	Definitions Pertaining To Licensure

1.1	ADDRESS:  THE STREET ADDRESS, CITY, STATE AND POSTAL CODE.

1.2	ADJUSTABLE RATE MORTGAGE:  A MORTGAGE IN WHICH THE TEASER RATE, PAYMENT RATE, OR  INTEREST RATE CHANGES PERIODICALLY AND, IN SOME CASES, MAY ADJUST ACCORDING TO CORRESPONDING FLUCTUATIONS IN AN INDEX.

1.3	ADJUSTMENT DATE:  THE DATE THE TEASER RATE, PAYMENT RATE, OR INTEREST RATE CHANGES ON AN ADJUSTABLE RATE MORTGAGE.

1.4	ADVERTISEMENT: IS ANY COMMERCIAL MESSAGE THAT PROMOTES CONSUMER CREDIT. ADVERTISEMENTS MAY APPEAR:

A.	IN NEWSPAPERS, MAGAZINES, LEAFLETS, FLYERS, CATALOGS, DIRECT MAIL LITERATURE, OR OTHER PRINTED MATERIAL;

B.	ON RADIO, TELEVISION, OR A PUBLIC ADDRESS SYSTEM;

C.	ON AN INSIDE OR OUTSIDE SIGN OR DISPLAY, OR A WINDOW DISPLAY;

D.	IN POINT-OF-SALE LITERATURE, PRICE TAGS, SIGNS, AND BILLBOARDS; OR

E.	ONLINE, SUCH AS ON THE INTERNET.

1.5	Bona Fide Nonprofit Organization:  An organization that complies with the following criteria:

A.	Has the status of tax-exempt organization under section 501(C)(3) of the internal revenue code of 1986, incorporated by reference in compliance with section 24-4-103(12.5), C.R.S., and does not include later amendments or editions of the code.  A certified copy of the code is readily available for public inspection at the offices of the Board of Mortgage Loan Originators at 1560 Broadway suite 925, Denver, Colorado.  The internal revenue code of 1986 may be examined at the internet website of the internal revenue service at www.irs.gov.  The internal revenue service may also be contacted at 1999 Broadway, Denver, Colorado 80202 or by telephone at (303) 446-1675;

B.	Promotes affordable housing or provides homeownership education, or similar services;

C.	Conducts its activities in a manner that serves public and charitable purposes, rather than commercial purposes;

D.	Receives funding and revenue and charges fees in a manner that does not incentivize it or its employees to act other than in the best interests of its clients;

E.	Compensates its employees to act other than in the best interests of its clients; and

F.	Provides or identifies for the borrower residential mortgage loans with terms favorable to the borrower and comparable to mortgage loans and housing assistance provided under the government housing assistance programs.

1.6	BUSINESS DAY:  ALL CALENDAR DAYS EXCEPT SUNDAYS AND FEDERAL HOLIDAYS.

1.7	BUSINESS NAME:  THE COMPANY FOR WHICH INDIVIDUALS WHO ORIGINATE A MORTGAGE, OFFER TO ORIGINATE A MORTGAGE, ACT AS A MORTGAGE LOAN ORIGINATOR, OR OFFER TO ACT AS A MORTGAGE LOAN ORIGINATOR ARE OFFICERS, PARTNERS, MEMBERS, MANAGERS, OWNERS, EXCLUSIVE AGENTS, CONTRACTORS, INDEPENDENT CONTRACTORS OR EMPLOYEES.

1.8	CONSUMER CREDIT:   MAY BE EITHER CLOSED-END OR OPEN-END CREDIT. IT IS CREDIT THAT IS EXTENDED PRIMARILY FOR PERSONAL, FAMILY, OR HOUSEHOLD PURPOSES. IT EXCLUDES BUSINESS AND AGRICULTURAL LOANS, AND LOANS EXCEEDING $25,000 THAT ARE NOT SECURED BY REAL PROPERTY OR A DWELLING. IT ALSO MUST BE EXTENDED BY A "CREDITOR".

1.9	CREDITOR:   IS A PERSON OR ORGANIZATION (A) THAT REGULARLY EXTENDS CONSUMER CREDIT FOR WHICH A FINANCE CHARGE IS REQUIRED OR THAT IS REPAYABLE IN MORE THAN FOUR INSTALLMENTS EVEN WITHOUT A FINANCE CHARGE, AND (B) TO WHOM THE OBLIGATION IS INITIALLY PAYABLE—FOR EXAMPLE, THE FINANCE COMPANY, BANK, AUTOMOBILE DEALER OR OTHER LENDER IDENTIFIED ON THE FACE OF THE CREDIT AGREEMENT. A PERSON OR ORGANIZATION IS CONSIDERED TO EXTEND CREDIT "REGULARLY," IF IT HAS EXTENDED CREDIT MORE THAN 25 TIMES DURING THE PRECEDING YEAR OR MORE THAN 5 TIMES FOR TRANSACTIONS SECURED BY DWELLINGS.

1.10	Employee:  An individual whose manner and means of performance of work are subject to the right of control of, or are controlled by, a person, and whose compensation for federal income tax purposes is reported, or required to be reported, on a W-2 form issued by the controlling person.

1.11	FINANCE CHARGE:   THE DOLLAR AMOUNT CHARGED FOR CREDIT. IT INCLUDES INTEREST AND OTHER COSTS, SUCH AS SERVICE CHARGES, TRANSACTION CHARGES, BUYER'S POINTS, LOAN FEES, AND MORTGAGE INSURANCE. IT ALSO INCLUDES THE PREMIUMS FOR CREDIT LIFE, ACCIDENT, AND HEALTH INSURANCE, IF REQUIRED, AND FOR PROPERTY INSURANCE, UNLESS THE BUYER MAY SELECT THE INSURER.

1.12	FIXED TERM:  THE LENGTH OF TIME A TEASER RATE, PAYMENT RATE, OR INTEREST RATE, IS FIXED AND WILL NOT ADJUST.

1.13	GOOD FAITH ESTIMATE DISCLOSURE:  IS THE DISCLOSURE FORM ESTABLISHED IN THE REAL ESTATE SETTLEMENT PROCEDURES ACT, PART 3500, APPENDIX C.  

1.14	Housing Finance Agency:  An authority that is chartered by the state of Colorado to help meet the affordable housing needs of the residents of Colorado; is supervised directly or indirectly by the state government; is subject to audit and review by the state of Colorado; and whose activities make it eligible to be a member of the National Council of State Housing Agencies.

1.15	HUD APPROVED HOUSING COUNSELING AGENCY:   IS AN AGENCY WHICH IS EITHER A PRIVATE OR PUBLIC NONPROFIT ORGANIZATION THAT IS EXEMPT FROM TAXATION UNDER SECTION 501(A) PURSUANT TO SECTION 501(C), OF THE INTERNAL REVENUE CODE OF 1996, 26, U.S.C. 501(A) AND 501(C), AND APPROVED BY THE U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT, IN ACCORDANCE WITH HOUSING COUNSELING PROGRAM HANDBOOK 7610.1 AND CODE OF FEDERAL REGULATIONS TITLE 24, PART 214.

1.16	Independent Contractor:  An individual who performs his or her duties other than at the direction of and subject to the supervision and instruction of an individual who is licensed and by the Board or is not required to be licensed based on one of the following:

A.	The individual is lawfully registered with, and maintains a unique identifier through, the Nationwide Mortgage Licensing System and Registry, and who is an employee of:

1.	A depository institution;

2.	A subsidiary that is:

a.	Owned and controlled by a depository institution; and

b.	Regulated by a federal banking agency; or

3.	An institution regulated by the farm credit administration; or

B.	An individual who is an employee of a federal, state, or local government agency or housing finance agency and who acts as a loan originator only pursuant to his or her official duties as an employee of a federal, state, or local government agency or housing finance agency; or

C.	An employee of a bona fie nonprofit organization who acts as a loan originator only with respect to his or her work duties to the bona fide nonprofit organization, and who acts as a loan originator only with respect to residential mortgage loans with terms that are favorable to the borrower.

1.17	INDEX:  THE INDEX FOR AN ADJUSTABLE RATE MORTGAGE.

1.18	INITIAL ADJUSTMENT CAP:  THE LIMIT ON HOW MUCH THE INTEREST OR PAYMENT RATE CAN CHANGE AT THE FIRST ADJUSTMENT PERIOD.

1.19	INTEREST RATE:  THE RATE USED TO CALCULATE A BORROWER’S MONTHLY INTEREST    PAYMENT.

1.20	LIFE CAP:  THE LIMIT ON HOW MUCH THE INTEREST OR PAYMENT RATE CAN CHANGE OVER THE LIFE OF THE LOAN.

1.21	LOAN MODIFICATION:   A TEMPORARY OR PERMANENT CHANGE IN ONE OR MORE OF THE TERMS OF A MORTGAGOR'S EXISTING LOAN, ALLOWS THE LOAN TO BE REINSTATED, AND OFTEN RESULTS IN A MORE AFFORDABLE MORTGAGE PAYMENT. THE BORROWER RETAINS OWNERSHIP OF THE REAL PROPERTY AND THE MORTGAGE NOTE AND THE DEED OF TRUST REMAINS INTACT. 

1.22	LOAN MODIFIER:   AN INDIVIDUAL WHO IN THE COURSE OF THE PERSON'S BUSINESS, VOCATION, OR OCCUPATION OFFERS TO ASSIST, PROVIDE, OR NEGOTIATE ON BEHALF OF A BORROWER TO FACILITATE THE RECEIPT OF A LOAN MODIFICATION FROM THE BORROWER’S CURRENT MORTGAGE LENDER, GENERALLY FOR A FEE OR OTHER THING OF VALUE.  

1.23	Offering or Negotiating Terms of a Residential Mortgage Loan:  To present for consideration to a borrower or prospective borrower particular residential mortgage loan terms, or to communicate directly or indirectly with a borrower, or prospective borrower for the purpose of reaching a mutual understanding about prospective residential mortgage loan terms.  An individual’s generic referral to or recommendation of a particular lender in and of itself, is not offering or negotiating the terms of a residential mortgage loan.

1.24	PAYMENT RATE:  THE RATE USED TO DETERMINE A BORROWER’S MONTHLY PAYMENT.

1.25	PAYMENT TYPE:  IS THE PRINCIPAL AND INTEREST, INTEREST ONLY OR NEGATIVE AMORTIZATION.

1.26	PHYSICAL ADDRESS:  THE PHYSICAL LOCATION OF THE PROPERTY.

1.27	PREPAYMENT PENALTY:  A FEE ASSESSED PURSUANT TO THE TERMS OF THE LOAN ON A BORROWER WHO REPAYS ALL OR PART OF THE PRINCIPAL OF A LOAN BEFORE IT IS DUE.  PREPAYMENT PENALTIES DO NOT INCLUDE INTEREST PAYMENTS OF THIRTY (30) DAYS OR LESS THAT MAY BE ASSESSED PURSUANT TO THE TERMS OF SOME FHA OR VA LOANS.  PREPAYMENT PENALTIES FOR THE PURPOSE OF THIS RULE DO NOT INCLUDE TERMINATION FEES OF $500.00 OR LESS THAT ARE ASSOCIATED WITH HOME EQUITY LINES OF CREDIT.

1.28	RATE:  THE TEASER RATE, PAYMENT RATE OR INTEREST RATE USED TO DETERMINE A BORROWER’S MONTHLY PAYMENT OR DEFERRED INTEREST SPECIFIC TO REVERSE MORTGAGE TRANSACTIONS.

1.29	Residential Mortgage Loan Application:  A request, in any form, for an offer (or a response to a solicitation of an offer) of residential mortgage loan terms, and the information about the borrower or prospective borrower that is customary and necessary in a decision on whether to make such an offer.

1.30	SAFE AND SECURE MANNER:  REASONABLE MEASURES ARE TAKEN TO MINIMIZE THE RISK OF LOSS, DAMAGE, OR THEFT.

1.31	SHORT SALE:   THE SALE OF A REAL PROPERTY FOR LESS THAN THE MORTGAGE LOAN BALANCE. IN THE SETTLEMENT OF THE SHORT SALE TRANSACTION THE EXISTING MORTGAGE IS EXTINGUISHED. ANY DEFICIENCY CREATED FROM THE SETTLEMENT OF THE TRANSACTION MAY BE TRANSFORMED INTO A PROMISSORY NOTE, CHARGED OFF, FORGIVEN, OR PURSUED AS A JUDGMENT AGAINST THE PREVIOUS OWNER.

1.32	Taking a Residential Mortgage Loan Application:  The receipt of a residential mortgage loan application by an individual for the purpose of facilitating a decision whether to extend an offer of residential mortgage loan terms to a borrower or prospective borrower, whether the application is received directly or indirectly from the borrower or prospective borrower.  An individual’s generic referral to or recommendation of a particular lender, in and of itself, is not taking a residential loan application.

1.33	TEASER RATE:  A TEMPORARY AND OFTEN LOW INTRODUCTORY RATE ON AN ADJUSTABLE RATE MORTGAGE.

1.34	TRUTH-IN-LENDING DISCLOSURE:  IS THE DISCLOSURE FORM ESTABLISHED BY THE TRUTH IN LENDING ACT, SPECIFIC TO REGULATION Z, APPENDICES H-2, H-3, H-4(A), (B), (C) AND (D).

1.35	UNIFORM RESIDENTIAL LOAN APPLICATION:  IS THE FREDDIE MAC FORM 65 OR THE FANNIE MAE FORM 1003 USED IN RESIDENTIAL LOAN TRANSACTIONS ON PROPERTIES OF FOUR OR FEWER UNITS.

A hearing on the above subject matter will be held on Wednesday, September 18, 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.