Chairman's Letter, Updates: Legislative

Legislative – Regulatory Update
February 3, 2010

The Legislative and Regulatory Affairs Committee of CMLA has been hard at work this year.  The committee has had the opportunity to work closely with Division of Real Estate Director Erin Toll on HB 10-1141, a bill that will allow local mortgage lenders who operate only in Colorado to continue to originate loans that will be saleable to Fannie Mae and Freddie Mac.  Last summer, the Federal Housing Finance Authority (FHFA) Fannie and Freddie’s regulator, put the industry on notice that beginning in 2010 they would require both Fannie and Freddie to require all loans purchased by either entity to contain unique identifiers for the Mortgage Loan Originator as well as for the company employing the mortgage loan originator.  At some point (currently July 31, 2010) loans which do not contain that information will be ineligible for purchase by Fannie or Freddie or inclusion in Fannie or Freddie mortgage backed securities (at this point this would cover virtually all of the conforming conventional loan market).  This policy is a particular problem for companies that originate only in Colorado, because our state licensing program licenses only Mortgage Loan Originators, not Companies.  The National Mortgage Licensing System and Registry (NMLS&R)mandated by the SAFE Act requires that in the process of obtaining a unique identifier from the NMLS&R, the state regulator for each state must validate that any person or entity applying for a unique identifier is in compliance with state regulations licensing mortgage loan originators and companies.  This whole situation resulted in a Catch 22 for companies that operate solely in Colorado.  Because Colorado does not license or regulate mortgage companies, there is currently no way for the state to vet a Colorado Company’s application for a NMLS&R uniqe identifier, thus without some new legislation, those Colorado companies could find their loans unsaleable to Fannie or Freddie.  One of the principal purposes of HB 10-1141 is to create the authority for the DRE to register mortgage companies which allows the companies to obtain a unique identifier from the NMLS&R.

HB10-1141 also has another real benefit to Licensed Mortgage Loan Originators who are employed by a company registered with the DRE once this new program is in effect (90 days after the adjournment of our legislature, or approximately August 12th).  The new law will  shift the responsibility for document retention from the Mortgage Loan Originator to the company that employs them. Licensed Mortgage Loan Originators who are not employees of mortgage companies registered in the state of Colorado will continue to be responsible for retaining and producing documents for 4 years per the current law.  HB 10-1141 also imposes responsibilities on registered mortgage companies regarding the employment of unlicensed mortgage loan originators (companies are required to verify that their originators are properly licensed at the time of hire, or in the process of obtaining their license, and also responsible not to continue to employ mortgage loan originators as originators once notified that the individual no longer has a valid license.  Such notification would presumably come from the NMLS&R or the DRE).  Companies are also required to comply with the same rules and regulations as individual Mortgage Loan Originators regarding advertising, although there is a provision that would not automatically impute a violation to a company if one of their employed  Mortgage Loan Originators were to violate the advertising rules and the company was not complicit in the creation of the advertising in question.

No one should stress about the dates set forth above, both Fannie and Freddie have indicated that they will be flexible on the dates of requiring unique identifiers to give states the opportunity to get in compliance with the new regulatory structure required by the SAFE Act.  We believe that leniency will also be applicable to the unique identifiers for companies.

The Committee is also following and is engaged in 10 other bills (out of the 368 bills introduced in the legislature so far).  The CMLA is supporting a bill that will standardize recording fees across all Colorado counties, making it easier to comply with the new RESPA requirements where you must disclose recording fees exactly, or pay any excess or refund the difference to the borrower out of your own pocket.  We are following several bills that will affect the foreclosure process, regulate Appraisal Management Companies, require the proper disposal of records containing personal information (like our loan files) and a bill that we had the opportunity to have input on sponsored by the Governor’s office that would expedite the foreclosure process for abandoned properties.  We are also following a bill HB 10-1151 with a close eye to being certain that it does not add any additional disclosure responsibility to individual Mortgage Loan Originators.

CMLA day at the Capitol is scheduled for February 16th  and is open to CMLA members only.  The day will start at the Capitol at 7:30 am with a coffee and pastries and a chance to meet and mingle with the State Legislators before they begin their day.  We’ll have a review of the legislation that has been introduced concerning our industry as well as an overview of Colorado State Government and the legislative process as to how a bill becomes a law in Colorado. We’ll also have an opportunity to hear from the sponsors of some of the legislation that could affect our industry this year.  Everyone in attendance will have the opportunity to go onto the floor of either the House or the Senate and see your legislature in action.  Activities will conclude before lunch (around 11:00 or so), so please plan to attend.  The meetings will take place in the old Supreme Court Chambers which can accommodate 100 + people so make it a point to attend if you can. To reserve your spot, please call the CMLA office at 303-773-9565 as soon as possible.