Foreclosure battle advances

Four bills seeking to stem foreclosures in the state moved closer to final approval Wednesday.

A bill to regulate the conduct of mortgage brokers, House Bill 1322, was amended Wednesday in a conference committee to bring its language in line with another mortgage-broker reform bill, Senate Bill 216.

HB 1322 initially required mortgage brokers to act for the "benefit of the borrower."

That standard was stricter than SB 216's requirement that brokers act with "good faith and fair dealing."

Critics, including the Colorado Mortgage Lenders Association, argued that "for the benefit of the borrower" created a fiduciary obligation that wasn't practical or enforceable.

"Mortgage brokers don't represent consumers, they represent the source of the funds," said Chris Holbert, CMLA president.

Colorado Attorney General John Suthers' office also weighed in, arguing that in terms of enforcement, the two bills needed to follow the same standard.

Rep. Rosemary Marshall, D-Denver, and co-sponsor Sen. Peter Groff, D-Denver, agreed to go with "good faith and fair dealing."

In addition to SB 216, two other bills targeting the state's foreclosure problem, detailed in a Denver Post series last year called "Foreclosing on the American Dream," moved out of the House Appropriations Committee to the full House.

They were Senate Bill 203, which would convert the state's mortgage-broker registration system to a licensing system, and Senate Bill 85, which would make it a serious crime to pressure an appraiser or to falsify an appraisal.

Lenders initiated more than 28,000 foreclosures in the state last year, including more than 19,000 in the Denver area.

Colorado had the highest rate of foreclosure filings per household of any state last year, according to RealtyTrac, a California provider of foreclosure listings.

Several states are looking at legislation to tighten lending rules. Massachusetts Gov. Deval Patrick went a step further Monday, proposing a foreclosure moratorium.

Massachusetts regulators will ask lenders foreclosing on adjustable rate loans to refinance those delinquent mortgages into fixed-rate loans on a case-by-case basis.

Staff writer Aldo Svaldi can be reached at 303-954-1410 or asvaldi@denverpost.com.

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