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

NOTICE OF PROPOSED PERMANENT RULEMAKING HEARING
July 30, 2015

CHAPTER 5:	PROFESSIONAL STANDARDS

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 amend or repeal existing rules with respect to professional standards and ensure that mortgage loan originators and mortgage companies are familiar with all current regulations with regard to mortgage disclosures.

Proposed New, Amended and Repealed Rules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.colorado.gov/dre.

CHAPTER 5:	PROFESSIONAL STANDARDS

5.13	Mortgage Loan Originator Disclosures

Section 12-61-914(1), C.R.S., requires that specific disclosures, set forth in § 12-61-914(2), C.R.S., be disclosed within three (3) business days after receipt of a loan application. or any moneys from a borrower.

5.14	FEES, COSTS, AND LOCK-IN DISCLOSURE REQUIREMENTS UNDER SECTION 12-61-914 AND SECTION 38-40-102, C.R.S.

A.	PURSUANT TO THE DISCLOSURE REQUIREMENTS SET FORTH IN SECTION 12-61-914, AND SECTION 38-40-102, C.R.S., MORTGAGE LOAN ORIGINATORS MUST FULLY COMPLY WITH ALL PROVISIONS OF THE TILA-RESPA INTEGRATED DISCLOSURE RULE, MUST DISCLOSE ALL FEES AND COSTS REQUIRED IN THE TILA-RESPA INTEGRATED DISCLOSURE RULE, AND MUST UTILIZE THE APPROPRIATE FORMS IN THE TILA-RESPA INTEGRATED DISCLOSURE RULE.  FULL COMPLIANCE WITH THE PROVISIONS OF THE TILA-RESPA INTEGRATED DISCLOSURE RULE SATISFIES THE DISCLOSURE REQUIREMENTS SET FORTH IN SECTION 12-61-914, AND SECTION 38-40-102, C.R.S.
B.	FOR ANY MORTGAGE LOAN APPLICATION OR TRANSACTION THAT IS EXEMPT FROM THE TILA-RESPA INTEGRATED DISCLOSURE RULE, MORTGAGE LOAN ORIGINATORS MUST DISCLOSE THE FOLLOWING:
1.	THE TRUTH-IN-LENDING DISCLOSURE;
2.	A FORM THAT ITEMIZES THE DISCLOSURE OF ALL THIRD-PARTY FEES AND COSTS AND MUST INCLUDE A MORTGAGE LOAN ORIGINATOR AND BORROWER SIGNATURE AND DATES IN WHICH THE DISCLOSURE WAS COMPLETED AND SIGNED. (INFORMATION COMMONLY FOUND IN THE PRE-2010 HUD GOOD FAITH ESTIMATE DISCLOSURE FORM); AND
3.	THE COLORADO LOCK-IN DISCLOSURE.
C.	WHEN APPLICABLE, THE DISCLOSURES SET FORTH IN RULE 5.14(B) MUST BE MADE WITHIN THREE (3) BUSINESS DAYS AFTER RECEIPT OF A LOAN APPLICATION, ENTERING INTO A LOCK-IN AGREEMENT, OR IF THE ANNUAL PERCENTAGE RATE INCREASES MORE THAN 1/8 OF ONE (1) PERCENTAGE POINT FROM AN EARLIER DISCLOSURE.
Disclosure requirements (information commonly found in the Truth in Lending Disclosure form) as defined in Section 12-61-914(2)(a), C.R.S., shall be disclosed:

A.	Within three (3) business days after receipt of a loan application or any moneys from a borrower;

B.	If, after the initial written disclosure is provided, a mortgage loan originator enters into a lock-in agreement, within three (3) business days thereafter and prior to the borrower signing loan closing documents; and

C.	If, after a mortgage loan originator enters into a lock-in agreement, the annual percentage rate increases from the annual percentage rate disclosed earlier by more than 1/8 of one (1) percentage point, within three (3) business days of such change and prior to the borrower signing loan closing documents.

The Truth in Lending Disclosure form is an acceptable manner in which to disclose the requirements set forth in this rule.

5.15	Disclosure requirements (information commonly found in the pre-2010 HUD Good Faith Estimate Disclosure form) as defined in Section 12-61-914(2)(b), C.R.S., shall be disclosed in the manner set forth in Rule 5.14, Sections (a) through (c); and

	The mortgage loan originator must create and implement a form that itemizes the disclosure of all third-party fees and costs.  The disclosure shall include mortgage loan originator and borrower signatures and dates in which the disclosure was completed and signed.

5.16	A mortgage loan originator shall not charge any fee that inures to the benefit of the mortgage loan originator and the mortgage company for which they are an officer, partner, member, exclusive agent, contractor, independent contractor or employee if such fee exceeds the fee disclosed on the previous written disclosure unless:

A.	The need to charge the fee was not reasonably foreseeable at the time the written disclosure was provided; and

B.	The mortgage loan originator has provided to the borrower, no less than (3) three business days and prior to the signing of the loan closing documents, a clear and written explanation of the fee and the reason for charging a fee exceeding that which was previously disclosed.

5.175.15Compensation disclosure requirements as defined in Section 12-61-914(2)(c), C.R.S., shall be disclosed pursuant to provisions and timelines defined in applicable Federal laws or according to any regulation adopted by the consumer financial protection bureau. MUST BE DISCLOSED PURSUANT TO THE MLO COMPENSATION RULE. FULL COMPLIANCE WITH THE PROVISIONS OF THE MLO COMPENSATION RULE SATISFIES THE DISCLOSURE REQUIREMENTS SET FORTH IN SECTION 12-61-914(2)(C), C.R.S. 

A.	Within three (3) business days after receipt of a loan application or any moneys from a borrower;

B.	If, after the initial written disclosure is provided, a mortgage loan originator enters into a lock-in agreement, within three (3) business days thereafter and prior to the borrower signing loan closing documents, the mortgage loan originator shall deliver or send by first-class mail to the borrower, the written Lock-in Disclosure.

C.	If, after a mortgage loan originator enters into a lock-in agreement, the annual percentage rate increases from the annual percentage rate disclosed earlier by more than 1/8 of one (1) percentage point, within three (3) business days of such change and prior to the borrower signing loan closing documents; and

D.	If, after the mortgage loan originator enters into a lock-in agreement, there is a change to any of the information provided on the Lock-in Disclosure form, including but not limited to a lock-in extension.

5.19	The Board has created the Colorado Lock-in Disclosure form to ensure this information is clearly and concisely disclosed.  This disclosure may be found on the Division of Real Estate’s website. A mortgage loan originator may use an alternate form if the alternate form clearly includes all information required on the Colorado Lock-in Disclosure form, as determined by the Board.

5.20	The Colorado Lock-in Disclosure form or alternate form shall be used when disclosing the secured rate of interest for the perspective borrower or disclosing that the interest rate is not secured and is subject to change.

A.	The mortgage loan originator shall disclose the amount of the teaser rate, payment rate or interest rate and also disclose the type of rate.  Examples of the type of rate include, but are not limited to:

1.	Teaser rate;

2.	Payment rate; or 

3.	Interest rate.

B.	When disclosing the payment type, mortgage loan originators shall define if the payment type is a negative amortization payment; interest only payment or principal and interest payment.

5.215.16Individuals who originate a mortgage or act as a mortgage loan originator are required to keep records of the disclosures, set forth in 12-61-914(2), C.R.S., AND THESE RULES, for a period of four FIVE years, for the purposes of inspection by the Board or authorized representative of the Board.

A.	All documents shall be kept in a safe and secure manner.  Electronic storage is acceptable as long as the information is accessible and kept in a safe and secure manner. 

B.	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 Board.  However, the mortgage loan originator is responsible for compliance with the Board’s request and is subject to disciplinary action if the company fails or refuses to provide the requested documentation.  

C.	The mortgage loan originator 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 after receipt of a loan application any moneys from the borrower or any subsequent changes to any loan terms requiring re-disclosure.

5.225.17Dual Status Disclosure

The Board prohibits individuals from acting as a mortgage loan originator and a Real Estate Broker, on the same transaction, unless they comply with the requirements set forth in this rule.

A.	Dual status is a material fact to real estate transactions and shall be disclosed to the borrower(s). 

B.	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.  A mortgage loan originator 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.

C.	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.

D.	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 FIVE years.

E.	The mortgage loan originator 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 after receipt of a loan application, any moneys from the borrower or any subsequent changes to any loan terms requiring re-disclosure.

A hearing on the above subject matter will be held on Thursday, July 30, 2015, at the Colorado Division of Real Estate, 1560 Broadway, Suite 110-D, 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.