DENVER – In his ongoing effort to curb mortgage and foreclosure fraud, Attorney General Suthers announced today a key legislative proposal that will target appraisal fraud and mortgage brokers who engage in deceptive trade practices.
“Last year, thanks to the efforts of the Attorney General’s Mortgage Fraud Task Force, new consumer protections were adopted for families facing foreclosure and stiffer penalties were enacted to address mortgage fraud,” said Suthers. “This year, we are taking further steps to protect homeowners. The legislation we are announcing today targets the growing problem of appraisal fraud, and adds additional penalties against mortgage brokers who engage in deceptive practices.”
Under the recommended legislation, the Division of Real Estate will have the authority to deny or revoke the registration of a mortgage broker who has been prohibited by any court from engaging in deceptive conduct relating to brokering a mortgage loan.
To address the growing wave of appraisal fraud, the legislation will also prohibit a mortgage broker from compensating, coercing, or intimidating a real estate appraiser in order to obtain an artificially inflated appraisal. Finally, the legislation will prohibit anyone else, including realtors, other brokers, lenders, or investors from improperly influencing, or attempting to influence an appraiser and the value of a residence, and prohibits an appraiser from knowingly submitting a false appraisal. Violators will be subject to criminal prosecution as a class 1 misdemeanor upon a first conviction and a class 6 felony upon a second or subsequent conviction. They will also be subject to civil liability under the Consumer Protection Act.
Rep. Tom Massey (R-Chaffee) and Sen. Jennifer Veiga (D-Denver) will sponsor the legislation this session.
“I’m pleased to work again with Attorney General Suthers on this important issue,” said Sen. Veiga. “This legislation is another tool we can give homeowners to combat a problem that has become much too prevalent in Colorado.”
“Mortgage and appraisal fraud are not just urban problems,” said Rep. Massey. “Rural areas such as my district have seen too many families lose their homes as a result of these fraudulent practices. I’m proud to carry this legislation in the house.”
In July 2005, General Suthers formed a Mortgage and Foreclosure Fraud Task Force. The Task Force’s recommendations subsequently led to SB-71, signed by Gov. Owens last May, which requires that all transactions between homeowners and foreclosure consultants or equity purchasers be in writing, prohibits consultants who provide advice or assistance from acquiring any interest in the homeowner’s property, and calls for a three-day “cooling off” period.