A pair of proposed rule changes in Colorado would mandate more transparency in the way mortgage originators and servicers do business in the state. A hearing on April 8 in the real estate division of the state’s Department of Regulatory Agencies will consider a proposed rule that would require mortgage originators to disclose specific details of a loan transaction to the borrower within three days of receipt of a loan application or prior to accepting money from a potential borrower. These disclosures would include the annual percentage rate; finance charge; amount financed; total amount of all payments; third party costs; and terms of a lock-in agreement. The rule would require originators to disclosed itemized costs of any credit report, appraisal, title report, title insurance policy, mortgage insurance, escrow fee, property tax, insurance, structural or pest inspection, and any other third-party provider’s costs associated with the residential mortgage. Originators may also become required to disclose the amount of any commission or other compensation to be paid to the mortgage loan originator, and the relationship of the commission to the cost of the loan received by the borrower. At that same April 8 hearing, the department will consider a second rule that would require individual loan modifiers and their direct managers to obtain licenses and establishes requisite use of a loan modification contract. The rule change is in response to a rise in mortgage modification programs that charge high fees for services, despite free housing counseling services put in place by the US Department of Housing and Urban Development (HUD). Many times the state contends some modification companies are scams that take consumer’s money and provide little to no service in return. The proposed rule would not apply to non-profit housing counseling agencies, but would apply to those who charge fees to negotiate mortgage modifications or other workout plans, including short sales, with a lender on behalf of the borrower. Write to Austin Kilgore.

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