New Mortgage Loan Originator Rules Effective January 1, 2021

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The Division initiated a statutory mandatory rule review in September 2019 to assess the continuing need for the appropriateness and the cost-effectiveness of the Mortgage Loan Originator (MLO) rules. It also assessed whether the rules should continue in their current form, be modified, or repealed. The rule review involved industry stakeholders, public feedback, and a task force that was established to review the current rules.

As a result of that rule review process, the Board of Mortgage Loan Originators held a permanent rulemaking hearing on July 15, 2020, to consider the proposed rules and the Board subsequently adopted these rules for MLO licensees.

The rules have been updated to consider MLOs holding licenses in multiple jurisdictions, reconcile with NMLS processes and procedures, and ensure consistent disclosure and record retention timelines.

The rules have been written in plain language and are easier to use and understand, and they now provide a clearer roadmap of the licensing and enforcement requirements of the Mortgage Loan Originator Licensing and Mortgage Company Registration Act.

MLO licensees should take the time to review and familiarize themselves with these newly adopted rules, which can be found on the Division’s website.

The rules as adopted are effective on January 1, 2021.

Rule Highlights Include

Chapter 1:  Definitions

Definitions were updated to provide defined terms in alphabetical order and to eliminate any outdated or unused terms.

New terms were added that are codified in statute including Board; Board Insurance Policy; Director; Division; Mortgage Company; Mortgage Loan Originator; Nationwide Mortgage Licensing System and Registry or NMLS; and Practice Act.

Other defined terms that were added include: Active; Applicant; Fee; Inactive; Jurisdiction; Petitioner; Responsible Mortgage Loan Originator or Responsible MLO; Sponsor or Sponsorship; and Valid. 

Chapter 2: Requirements for Licensure

The rules were reorganized and the licensure requirements are now arranged by activity. Education, examination and insurance requirements for licensure are set forth in this chapter, as well as the licensing process for both the Division and the NMLS.

The chapter subsections include rules on:

  • Pre-Licensing Education Requirements;
  • S.A.F.E. Mortgage Loan Originator Examination Requirement;
  • Criminal Background Check Requirement;
  • NMLS Requirement;
  • Temporary Authority Eligibility and Temporary License;
  • Temporary license;
  • Surety Bond Requirement;
  • Errors and Omissions Insurance Requirement;
  • Application Process for Licensure;
  • Invalid Payment;
  • Review of Application Completeness;
  • Applicants with Prior or Pending Criminal Record;
  • Applicants with Past or Pending Administrative Disciplinary Actions or Findings; and
  • Preliminary Advisory Opinion.

Note: In addition to E&O insurance, mortgage loan originators are required to have a surety bond in compliance with Rule 2.6, where the surety bond requirements are now codified in the rule.

Chapter 3:  Continuing Education Requirements

These chapter rules set forth the MLO continuing education requirements.

Rule 3.1 was modified to eliminate the 1 hour of Colorado specific education as a continuing education requirement that was previously included in the required minimum of 8 hours of education.

Chapter 4:  Renewal, Reinstatement, Re-application, or License Status

These chapter rules set forth the requirements and processes for licensing renewal, reinstatement, and re-application, and license status (active or inactive). The rules were streamlined to reconcile Colorado’s requirements and processes with MLOs holding a license in another jurisdiction.

Chapter 5:  Professional Standards

These chapter rules set forth the professional practice standards for MLOs. The rules were updated to ensure consistent disclosure and record retention timelines, as well as updated language to contemplate different origination, business models.

Rule 5.6 Reasonable Inquiry: This rule was modified and changed the level of review of the borrower’s current prospective financial status from “interview and discuss with the borrower” to “review and analyze the information submitted by the borrower.”

Chapter 6:  Board Review of Initial Decisions and Exceptions

These chapter rules set forth the requirements for the review of initial decisions by the Board and the procedures for filing exceptions. These are standard rules for other programs within the Division, and the rules were modified to aid pro se litigants to better understand the exceptions process.

Chapter 7:  Declaratory Orders

These chapter rules set forth the requirements and procedures to petition the Board for a declaratory order. Declaratory orders are standard rules within the Division’s other programs and the rules need to be compliant with the Colorado Administrative Procedure Act.

Chapter 8:  Nationwide Multistate Licensing System and Registry (“NMLS”)

These chapter rules set forth the requirements and procedures to challenge the information entered into the NMLS by the Division and the procedures for submitting call reports to the NMLS.