Colorado will start oversight of fast-growing non-bank mortgage companies on Jan. 1

Colorado will start oversight of fast-growing non-bank mortgage companies on Jan. 1
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In the years following the Great Recession of 2008, lenders not regulated by the state government, from Quicken Loans to PennyMac, came to dominate the Colorado mortgage market.

This lack of scrutiny is about to change. Beginning January 1, the Colorado government will finally begin to supervise mortgage providers that operate outside of Colorado banking regulations.

“In Colorado, we are actually one of the last states to take action to give the state government the authority to supervise non-bank mortgage providers,” said Attorney General Phil Weiser. “Most countries already have this regulatory oversight…and we have addressed this failure now.”

Under new law HB21-1282And Non-bank lenders will be required to register with the state, and the state attorney general’s office will be allowed to inspect their records.

The Washington Post reported that non-bank lenders now make up more than half of the market, in part because banks are reducing their presence in the market. They’ve also been able to grow faster because they don’t face the same amount of oversight from the federal government.

There may be about 125 of these companies operating in Colorado, according to state public finance analysts.

Non-bank lenders are already covered by federal regulations, but new state law will allow the state to impose a matching set of requirements. Companies will also have to pay states fees totaling about $126,000 annually for the entire industry.

The point is to let lenders know that “another set of eyes are watching their behavior,” said Representative Mike Wiseman, an Aurora Democrat who had sponsored the bill along with Senator Julie Gonzalez. “If there are bad actors, we think it is important that there are consequences,” he added.

Weiser said the new regulations were not in response to ongoing bad behavior, and instead said they were preventive.

“I want to start with the motto of constant vigilance. We don’t want to wait for a problem to arise here.

Federal regulators have found a number of problems with non-bank lenders. For example, Mr. Cooper’s company, formerly known as Nationstar, agreed to refund $90 million to 115,000 customers and pay a $6.5 million fine after the Consumer Financial Protection Bureau sued it for illegal foreclosure, HousingWire reported.

The attorney general’s office has received about 120 complaints about mortgage companies this year, and most of them involved non-banking companies, according to spokesman Lawrence Pacheco.

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