Division of Real Estate Division of Real Estate State of Colorado DORA


S.A.F.E Implementation Page

Colorado State | Dept. of Regulatory Agencies | Div. of Real Estate| Mortgage Broker Information

Background:

In July of 2008, Congress passed the Housing and Economic Recovery Act of 2008.  A small portion of this Act is Title V – The S.A.F.E. Mortgage Licensing Act, which may also be cited as the Secure and Fair Enforcement for Mortgage Licensing Act of 2008.  In summary, this bill sets minimum national licensing standards for mortgage loan originators and requires that all mortgage loan originators are registered on the Nationwide Mortgage Licensing System and Registry.  This bill is a requirement for states to ensure their laws are consistent with the S.A.F.E. Act and is also a requirement for the development of the Nationwide Mortgage Licensing System and Registry.  As a result, the Colorado General Assembly passed House Bill 09-1085 in May of 2009.  House Bill 09-1085 becomes effective August 5, 2009.  Additionally, this law groups all mortgage loan originators into one of two categories:

Category 1 – Mortgage loan originators who are:

  • Employees of a depository institution;
  • Employees of:
    • a subsidiary that is owned and controlled by a depository institution;
    • a subsidiary that is regulated by a Federal banking agency; or
    • an institution regulated by the Farm Credit Administration.

Category 2 – All other mortgage loan originators not described in category 1.

Mortgage loan originators described in category 1 are required to register with the Federal Banking Agencies as defined in the S.A.F.E. Mortgage Licensing Act.  This includes the Board of Governors of the Federal Reserve System, the Comptroller of Currency, the Director of Thrift Supervision, the National Credit Union Administration, and the Federal Deposit Insurance Corporation.  

All other mortgage loan originators and independent contrator loan processors and underwriters are required to be licensed as State-Licensed Loan Originators..  In order to be licensed as a State-Licensed Loan Originator, the individual must be licensed by the state regulatory authority, in Colorado this is the Director of the Division of Real Estate, and must be registered through the Nationwide Mortgage Licensing System and Registry (the “NMLS&R”).  The Colorado General Assembly passed House Bill 09-1085 to ensure Colorado is compliant with the S.A.F.E. Mortgage Licensing Act.  To review this law, please visit http://www.leg.state.co.us/Clics/CLICS2009A/csl.nsf/fsbillcont3/8538D858778CAB9F87257537001D21D9?Open&file=1085_enr.pdf

All mortgage loan originators described in Category 2 must be licensed as State-Licensed Loan Originators by December 31, 2010.  Colorado's transition date for the Nationwide Mortgage Licensing System and Registry is January of 2010.  As a result, the registration process for individuals seeking to become licensed as state-licensed loan originators in Colorado begins in January of 2010.

Important Definitions:

“Mortgage Loan Originator” means an individual who:

  1. takes a residential loan application; or
  2. offers or negotiates terms of a residential mortgage loan.

“Nationwide Mortgage Licensing System and Registry” means a mortgage licensing system developed pursuant to the Federal “Secure and Fair Enforcement for Mortgage Licensing Act of 2008”, 12 U.S.C. sec. 5101 et seq., to track the licensing and registration of mortgage loan originators and that is established and maintained by the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators or, their successor entities.

“State Licensed Loan Originator” means an individual who is:

  1. A mortgage loan originator or engages in the activities of a mortgage loan originator;
  2. Not an employee of a depository institution or a subsidiary that is:
    1. Owned and controlled by a depository institution;
    2. Regulated by a Federal Banking Agency;
  3. Licensed or required to be licensed pursuant to the Mortgage Loan Originator Licensing Act; and
  4. Registered as a state-licensed loan originator with, and maintains a unique identifier through, the NMLS&R.

In summary, newly affected mortgage loan originators who are now under the jurisdiction of the Director of the Division of Real Estate are as follows:

1. Mortgage loan originators working for affiliates of depository institutions, as defined in section 1503 (2) of the S.A.F.E. Act;

2. Mortgage loan originators involved in chattel financing relating to residential real estate;

3. Mortgage Loan originators working for non-profit organizations; and

4. Independent contractor loan processors and underwriters.

Mortgage Company Registration Required

Mortgage companies are to be registered on the NMLS by January 1, 2011. In order to become registered, a company has to meet two requirements. They are as follows:

  • They are in good standing with the Colorado Secretary of State; and
  • The mortgage company shall not be legally barred from operating in Colorado.

12-61-903.1. Registration required - rules.

(1) ON OR AFTER JANUARY 1, 2011, EACH MORTGAGE COMPANY SHALL REGISTER WITH THE NATIONWIDE MORTGAGE LICENSING SYSTEM AND REGISTRY, UNLESS EXEMPTED BY RULE BY THE BOARD, AND SHALL RENEW SUCH REGISTRATION EACH CALENDAR YEAR BASED ON THE FOLLOWING CRITERIA:

(a) (I) THE MORTGAGE COMPANY IS LEGALLY OPERATING IN THE STATE OF COLORADO IN ACCORDANCE WITH STANDARDS DETERMINED AND ADMINISTERED BY THE COLORADO SECRETARY OF STATE; AND (II) THE MORTGAGE COMPANY IS NOT LEGALLY BARRED FROM OPERATING IN COLORADO.

(b) SOLE PROPRIETORS, GENERAL PARTNERSHIPS, AND OTHER MORTGAGE COMPANIES NOT OTHERWISE REQUIRED TO REGISTER WITH THE SECRETARY OF STATE SHALL REGISTER USING A TRADE NAME.

NMLS&R contact information:

NMLS&R web page: http://www.stateregulatoryregistry.org/NMLS//AM/Template.cfm?Section=Home3

NMLS&R customer service phone number: (240) 386-4444

.

Frequently Asked Questions:

  1. What is the S.A.F.E. Act?
    1. The S.A.F.E. Act is part of the Housing and Economic Recovery Act of 2008 that was signed into law in July of 2008.
  1. What is the purpose of the S.A.F.E. Act?
    1. The purpose of the S.A.F.E. Act is to set minimum national licensing standards for mortgage loan originators and to establish a national registry for all mortgage loan originators.
  1. What does the S.A.F.E. Act require?
    1. The S.A.F.E. Act mandates that states adopt provisions defined in the Act and mandates the establishment and use of a nationwide registry system.
  1. How do I register with the NMLS&R database?
    1. You will need to follow the checklists that are provided on this web page.  Additionally, you’ll need to complete the appropriate registration forms on the NMLS&R.
  1. What if I have specific questions about the registration process?
    1. The NMLS&R was developed with customer service in mind.  The NMLS&R provides an effective customer service center to walk you through any problems or questions you may have with the system. The contact information for the NMLS&R may be found on their website at http://www.stateregulatoryregistry.org/NMLS/AM/Template.cfm?Section=The_Industry
  1. Am I compliant if I already have and maintain a license through the Director of the Division of Real Estate?
    1. No.  On and after July 31, 2010, all mortgage loan originators under the jurisdiction of the Director are required to be licensed by the Director of the Division of Real Estate and registered through the NMLS&R system. 
  1. What are some of the main differences between the S.A.F.E. Act and current Colorado mortgage broker law?
    1. The S.A.F.E. Act uses the term mortgage loan originator as opposed to the term mortgage broker.
    1. The S.A.F.E. Act requires that mortgage loan originators are licensed at the state level and registered with the NMLS&R. 
    1. The S.A.F.E. Act disqualifies any mortgage loan originator who has had their license or a similar license revoked in any governmental jurisdiction.  Colorado previously disqualified individuals for five (5) years if they had their mortgage broker license revoked or suspended for reasons related to fraud, theft, deceit, material misrepresentation or the breach of a fiduciary duty.
    1. The S.A.F.E. Act disqualifies an individual from licensure if they have been convicted, pled guilty or nolo contendere to any felony in the past 7 years.  Colorado currently has a list of applicable crimes for license denial or revocation, but previous law did not include all felonies.
    1. The S.A.F.E. Act permanently disqualifies an individual from licensure if they have been convicted, pled guilty or nolo contendere to a felony at any time preceding an application if the felony involved an act of fraud, dishonesty, a breach of a fiduciary duty or money laundering.  Colorado law previously disqualified individuals if they have been convicted, pled guilty or nolo contendere to any crime in the past 5 years involving fraud, theft, deceit, material misrepresentation or the breach of a fiduciary duty.
    1. The S.A.F.E. Act requires that mortgage loan originators have demonstrated financial responsibility, character, and general fitness such as to command the confidence of the community and to warrant a determination that the loan originator will operate honestly, fairly and efficiently.  While Colorado law did not contain similar language, it does require mortgage brokers to obtain and maintain a surety bond and errors and omissions insurance.
    1. The S.A.F.E. Act requires mortgage loan originators to pass a national test administered by the Nationwide Mortgage Licensing System and Registry.
    1. The S.A.F.E. Act requires licensure for processors and underwriters who are independent contractors.  Previous Colorado law was not applicable to processors or underwriters, regardless of how they are compensated.
    1. The S.A.F.E Act requires licensure at the state level for employees and exclusive agents for affiliates of banks, credit unions and other similar financial depository institutions.  Colorado previously exempted employees and exclusive agents for affiliates of banks.
    1. The S.A.F.E. Act requires licensure for individuals originating or negotiating financing for mobile and modular homes, commonly called chattel loans, relating to residential real estate.  Previous Colorado law does not require licensure for such individuals.
    1. The S.A.F.E. Act requires the completion of 8 hours of continuing education on an annual basis.  Previous law required 9 hours of continuing education every three (3) years.
  1. What are some benefits to Colorado in regards to adoption of these provisions?
    1. Colorado consumers will be better protected from mortgage loan originators who operate in multiple states.
    1. Mortgage loan originators who have their license revoked in another state will not be able to acquire licensure in Colorado due to the nationwide registry.  The nationwide registry tracks compliance from state to state ensuring that bad actors cannot become licensed in Colorado.  Currently, there is central database that tracks compliance from state to state.
    1. The new provisions disqualify more individuals due to past criminal history.
    1. It will be easier for Colorado mortgage loan originators to become licensed and transact business in other states.
    1. Mortgage loan originators are required to complete more continuing education hours.  

 

Consumer Protection