2009.09.04 02:29:40

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The Colorado Division of Real Estate on Monday inactivated 4,560 mortgage broker licenses, about half of the licenses in the state.

A total of 4,252 licensed mortgage brokers remained active in Colorado as of Monday August 31, 2009.

When Colorado’s mortgage broker licensing last went into effect on January 1, 2008, all of the state’s brokers were automatically licensed. But to keep those licenses, they has one year to fulfill the same requirements as new applicants, which include completing 40 hours of licensing education and passing a written test.

The two-part exam tests applicants’ knowledge of federal, state and consumer protection laws, and mortgage lending basics and ethics. By December 31, 2008, nearly 6,000 brokers either still hadn’t passed or hadn’t attempted the exam. Afraid that deactivating so many mortgage brokers at once would hurt the state’s credit markets, the Division of Real Estate granted a 90-day extension, which ended on March 31.

 Brokers who are listed as inactive on the Colorado Division of Real Estates website, www.dora.state.co.us face a bigger problem than simply running afoul of state regulators. By July 31, 2010, all mortgage loan originators must register with the Nationwide Mortgage Licensing System and Registry (NMLS), a national tracking system established by the federal Secure and Fair Enforcement (S.A.F.E.) Mortgage Licensing Act of 2008.

Unless the loan originator is employed by a federally regulated bank or thrift or one of its subsidiaries, the only way to gain access to the NMLS is to be licensed by the state. Although other states allow entire companies to become licensed, giving every mortgage broker access to the national registry, Colorado doesn’t. Colorado’s licensing system applies only to individuals, and Colorado law would have to be changed to alter that, said Erin Toll, director of the Colorado Division of Real Estate, which regulates Colorado’s mortgage brokers.

Why does it matter for a broker to be registered on the NMLS? Because beginning January 1, 2010, mortgage giants Fannie Mae and Freddie Mac won’t buy loans that lack a loan origination identifier, which can only be obtained by being on the NMLS.

About 60 percent of all U.S. residential mortgage loans are sold to either Fannie Mae or Freddie Mac according to Fannie Mae and Freddie Mac. Toll estimates that between 60 and 70 percent of all Colorado single-family home loans are sold to one or the other.

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