Colorado Eyeing Tough Mortgage Laws

The Colorado legislature is on track to pass some of the toughest laws in the country governing the conduct of state-licensed mortgage bankers, loan officers, and mortgage brokers in response to the state's foreclosure problems.Several bills coming up for a vote would require the state's 22,000 originators to have a surety bond and errors-and-omissions insurance. These measures would create a "duty of good faith and fair dealing" with borrowers and prohibit unconscionable acts, such as making a loan the borrower cannot afford to repay. A mortgage fraud bill creates a private right of action for borrowers to sue originators and other real estate professionals. There also are penalties for intimidating or coercing appraisers, along with criminal penalties against anyone who knowingly submits a false appraisal. "Colorado's aggressive response to our high foreclosure rate is really going to capture a lot of attention," said Erin Toll, director of Colorado's real estate division.