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Newsletter - November, 2005
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Table of
Contents
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Registration of Mortgage Brokers
On October 19th, the Colorado Department of
Regulatory Agencies
(DORA) recommended the registering of mortgage brokers, a move that
would require
brokers to submit to criminal and regulatory history background checks
as well as post a $100,000 bond.
If this measure, expected to go before the state
legislature in
January, is approved, it will be a Class 1 misdemeanor to work as a
mortgage broker without being registered with the State of
Colorado.
At this time Colorado and Alaska are the only states
that have refrained from regulating mortgage brokers.
This issue has two Colorado mortgage broker trade
groups in
disagreement. The Colorado Association of Mortgage Brokers, the
requester of the DORA evaluation under Colorado’s sunrise statute,
asserts that regulating brokers would be a positive step toward curbing
fraud.
To support this belief, an article in Origination
News by Jennifer
Harmon notes that after a similar broker bill was passed in Ohio, 10%
of the people who applied for registration were rejected because of a
past conviction. As B. Glen Bartholomew, president of CAMB, (camb.org)
states, “we know we can’t stop someone from committing fraud, but we
can stop the ones who have been caught.”
On the other side of the fence, the Colorado
Mortgage Lenders
Association (cmla.com) maintains that regulation will not help prevent
fraud.
President of CMLA, Chris Holbert, states, “We can
pass more laws
all we want, but if mortgage brokers and bankers want to break laws,
they will break them even if they are registered.”
However, there is an additional voice that must be
brought in to
the argument, an important viewpoint that was thoughtfully considered
in DORA’s evaluation of the sunrise application.
In the “Need for Regulation” section located toward
the end of the thirty plus page document it is written:
Finally, public perception must be considered. It is widely known
that
the banking and financial services industries, in general, are heavily
regulated. Members of the general public very likely assume that
mortgage brokers, too, are regulated. This creates an environment
in
which unscrupulous mortgage brokers can operate because the public
trusts that the mortgage broker with whom they work has been approved
by the state and that what may appear to be questionable practices are
legitimate and legal.
Sometimes, as professionals, we don’t stop to think
about how our
professions are perceived by the “average citizen.” We tend to
get
caught up in professional issues, professional legislation, and
professional self interest and forget that we are all a part of a
bigger picture, a picture that depends on the ethical treatment of the
“average citizen” to keep our businesses profitable.
Even by taking common decency for others and
adhering to ethical
business practices out of the equation, by permitting, in any way, the
occurrence of fraudulent practices against the consumer we are in
effect cutting our own throats. Only those who are not professionals by
character and who look no further than making a quick buck and then
moving on to the next scam will benefit from zero regulation.
Those of us who take the responsibilities of their
profession
seriously realize the overall good health of the economy will enable us
to make a profitable, long-term, and ethical livelihood.
For those who renounce the registering of mortgage
brokers, there
are a few words of advice--besides the “inconvenience” of bonding and
dues (a protective condition designed to weed out unprincipled players
that appraisers and most real estate professionals have complied with
for years)--if you conduct your business honestly, ethically, and
legally, you have nothing to fear.
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