Mortgage Brokers - Lenders

C.R.S. tit. 38, art. 40
in effect

C.R.S. § 38-40-101 Mortgage broker fees - escrow accounts - unlawful act - penalty

38-40-101. Mortgage broker fees - escrow accounts - unlawful act - penalty. (1) Any funds, other than advanced for actual costs and expenses to be incurred by the mortgage broker on behalf of the applicant for a loan, paid to a mortgage broker as a fee conditioned upon the consummation of a loan secured or to be secured by a mortgage or other transfer of or encumbrance on real estate shall be held in an escrow or a trustee account with a bank or recognized depository in this state. Such account may be any type of checking, demand, passbook, or statement account insured by an agency of the United States government. (2) It is unlawful for a mortgage broker to misappropriate funds held in escrow or a trustee account pursuant to subsection (1) of this section. (3) The withdrawal, transfer, or other use or conversion of any funds held in escrow or a trustee account pursuant to subsection (1) of this section prior to the time a loan secured or to be secured by mortgage or other transfer of or encumbrance on real estate is consummated shall be prima facie evidence of intent to violate subsection (2) of this section. (4) Any mortgage broker violating any of the provisions of subsection (2) of this section commits theft as defined in section 18-4-401, C.R.S. (5) Any mortgage broker violating any of the provisions of subsection (1) or (2) of this section shall be liable to the person from whom any funds were received for the sum of one thousand dollars plus actual damages caused thereby, together with costs and reasonable attorney fees. No lender shall be liable for any act or omission of a mortgage broker under this section. (6) As used in this section, unless the context otherwise requires, "mortgage broker" means a person, firm, partnership, association, or corporation, other than a bank, trust company, savings and loan association, credit union, supervised lender as defined in section 5-1-301 (46), C.R.S., insurance company, federal housing administration approved mortgagee, land mortgagee, or farm loan association or duly appointed loan correspondents, acting through officers, partners, or regular salaried employees for any such entity, that engages in negotiating or offering or attempting to negotiate for a borrower, and for commission, money, or other thing of value, a loan to be consummated and funded by someone other than the one acting for the borrower.

C.R.S. § 38-40-102 Disclosure of costs - statement of terms of indebtedness

38-40-102. Disclosure of costs - statement of terms of indebtedness. (Repealed)

C.R.S. § 38-40-103 Servicing of mortgages and deeds of trust - liability for interest or late fees for property taxes

38-40-103. Servicing of mortgages and deeds of trust - liability for interest or late fees for property taxes. (1) (a) (I) Any person who regularly engages in the collection of payments on mortgages and deeds of trust for owners of evidences of debt secured by mortgages or deeds of trust shall promptly credit all payments which are received and which are required to be accepted by such person or his agent and shall promptly perform all duties imposed by law and all duties imposed upon the servicer by such evidences of debt, mortgages, or deeds of trust creating or securing the indebtedness. (II) No more than twenty days after the date of transfer of the servicing or collection rights and duties to another person, the transferor of such rights and duties shall mail a notice addressed to the debtor from whom it has been collecting payments at the address shown on its records, notifying such debtor of the transfer of the servicing of his or her debt and the name, address, and telephone number of the transferee of the servicing. (b) The debtor may continue to make payments to the transferor of the servicing of his or her loan until a notice of the transfer is received from the transferee containing the name, address, and telephone number of the new servicer of the loan to whom future payments should be made. Such notice may be combined with the notice required in subparagraph (II) of paragraph (a) of this subsection (1). It shall be the responsibility of the transferor to forward to the transferee any payments received and due after the date of transfer of the loan. (2) The servicer of a loan shall respond in writing within twenty days from the receipt of a written request from the debtor or from an agent of the debtor acting pursuant to written authority from the debtor for information concerning the debtor's loan, which is readily available to the servicer from its books and records and which would not constitute the rendering of legal advice. Any such response must include the telephone number of the servicer. The servicer shall not be liable for any damage or harm that might arise from the release of any information pursuant to this section. (3) The servicer of a loan shall annually provide to the debtor a summary of activity related to the loan. Such a summary shall contain, but need not be limited to, the total amount of principal and interest paid on the loan in that calendar year. (4) The servicer of a loan shall be liable for any interest or late fees charged by any taxing entity if funds for the full payment of taxes on the real estate have been held in an escrow account by such servicer and not remitted to the taxing entity when due.

C.R.S. § 38-40-103.5 Notice upon transfer of servicing rights - prior servicer's offer to borrower survives transfer - definitions

38-40-103.5. Notice upon transfer of servicing rights - prior servicer's offer to borrower survives transfer - definitions. (1) As used in this section: (a) "Borrower" means a person liable under an evidence of debt constituting a residential mortgage loan. (b) "Evidence of debt" has the meaning set forth in section 38-38-100.3 (8). (c) "Holder" means the holder of an evidence of debt constituting a residential mortgage loan. (d) "Residential mortgage loan" has the meaning set forth in section 12-10-702 (21). (e) (I) "Servicer" means a person who collects, receives, or has the right to collect or receive payments on behalf of a holder, including payments of principal, interest, escrow amounts, and other amounts due on obligations due and owing to the holder. (II) "Servicer" includes: (A) The person or entity to whom payments are to be sent, as listed on the most recent billing statement or payment coupon provided to the borrower; or (B) A subsidiary, affiliate, or assignee of a servicer, however designated, including a person designated as a subservicer. (2) A servicer to whom servicing rights for a residential mortgage loan have been sold or transferred by the holder or by a predecessor servicer is subject to, and shall honor, the borrower's acceptance, prior to the sale or transfer of servicing rights, of any offer previously made by the holder or predecessor servicer in connection with a modification of a residential mortgage loan. (3) At the time of the transfer or sale of servicing rights for a residential mortgage loan, the transferor or seller shall inform the buyer or transferee of the servicing rights whether a loan modification is pending. (4) A contract for the transfer or sale of servicing rights for a residential mortgage loan must obligate the successor servicer to: (a) Accept and continue processing any pending loan modification requests; and (b) Honor any trial and permanent loan modification agreements entered into by the prior servicer.

C.R.S. § 38-40-104 Cause of action - attorney fees

38-40-104. Cause of action - attorney fees. (1) If any applicant or debtor is aggrieved by a violation of section 38-40-102, 38-40-103, 38-40-103.5, or 38-40-106 and the violation is not remedied in a reasonable, timely, and good faith manner by the party obligated to do so, and after a good faith effort to resolve the dispute is made by the debtor or borrower, the debtor or borrower may bring an action in a court of competent jurisdiction for any such violation. If the court finds that actual damages have occurred, the court shall award to the debtor or borrower, in addition to actual damages, the amount of one thousand dollars, together with costs and reasonable attorney fees. (2) A transferee from a lender is not liable for any act or omission of the lender under section 38-40-102. A transferee of servicing or collection rights is not liable for any act or omission of the transferor of those rights under section 38-40-103 or 38-40-103.5.

C.R.S. § 38-40-105 Prohibited acts by participants in certain mortgage loan transactions - unconscionable acts and practices - definitions

38-40-105. Prohibited acts by participants in certain mortgage loan transactions - unconscionable acts and practices - definitions. (1) The following acts by any mortgage broker, mortgage originator, mortgage lender, mortgage loan applicant, real estate appraiser, or closing agent, other than a person who provides closing or settlement services subject to regulation by the division of insurance, with respect to any loan that is secured by a first or subordinate mortgage or deed or trust lien against a dwelling are prohibited: (a) To knowingly advertise, display, distribute, broadcast, televise, or cause or permit to be advertised, displayed, distributed, broadcast, or televised, in any manner, any false, misleading, or deceptive statement with regard to rates, terms, or conditions for a mortgage loan; (b) To make a false promise or misrepresentation or conceal an essential or material fact to entice either a borrower or a creditor to enter into a mortgage agreement when, under the terms and circumstances of the transaction, he or she knew or reasonably should have known of such falsity, misrepresentation, or concealment; (c) To knowingly and with intent to defraud present, cause to be presented, or prepare with knowledge or belief that it will be presented to or by a lender or an agent thereof any written statement or information in support of an application for a mortgage loan that he or she knows to contain false information concerning any fact material thereto or if he or she knowingly and with intent to defraud or mislead conceals information concerning any fact material thereto; (d) To facilitate the consummation of a mortgage loan agreement that is unconscionable given the terms and circumstances of the transaction; (e) To knowingly facilitate the consummation of a mortgage loan transaction that violates, or that is connected with a violation of, section 12-10-713. (f) (Deleted by amendment, L. 2009, (HB 09-1085), ch. 303, p. 1638, § 4, effective August 5, 2009.) (1.5) (Deleted by amendment, L. 2009, (HB 09-1085), ch. 303, p. 1638, § 4, effective August 5, 2009.) (1.7) (a) A mortgage broker or mortgage originator shall not commit, or assist or facilitate the commission of, the following acts or practices, which are hereby deemed unconscionable: (I) Engaging in a pattern or practice of providing residential mortgage loans to consumers based predominantly on acquisition of the foreclosure or liquidation value of the consumer's collateral without regard to the consumer's ability to repay a loan in accordance with its terms; except that any reasonable method may be used to determine a borrower's ability to repay. This subparagraph (I) shall not apply to a reverse mortgage that complies with article 38 of title 11, C.R.S. (II) Knowingly or intentionally flipping a residential mortgage loan. As used in this subparagraph (II), "flipping" means making a residential mortgage loan that refinances an existing residential mortgage loan when the new loan does not have reasonable, tangible net benefit to the consumer considering all of the circumstances, including the terms of both the new and refinanced loans, the cost of the new loan, and the consumer's circumstances. This subparagraph (II) applies regardless of whether the interest rate, points, fees, and charges paid or payable by the consumer in connection with the refinancing exceed any thresholds specified by law. (III) Entering into a residential mortgage loan transaction knowing there was no reasonable probability of payment of the obligation by the consumer. new loan, and the consumer's circumstances. This subparagraph (II) applies regardless of whether the interest rate, points, fees, and charges paid or payable by the consumer in connection with the refinancing exceed any thresholds specified by law. (III) Entering into a residential mortgage loan transaction knowing there was no reasonable probability of payment of the obligation by the consumer. (b) Except as this subsection (1.7) may be enforced by the attorney general or a district attorney, only the original parties to a transaction shall have a right of action under this subsection (1.7), and no action or claim under this subsection (1.7) may be brought against a purchaser from, or assignee of, a party to the transaction. (2) (a) Except as provided in subsection (5) of this section, if a court, as a matter of law, finds a mortgage contract or any clause of the contract to have been unconscionable at the time it was made, the court may refuse to enforce the contract, or it may enforce the remainder of the contract without the unconscionable clause, or it may so limit the application of any unconscionable clause as to avoid any unconscionable result. (b) When it is claimed or appears to the court that the contract or any clause thereof may be unconscionable, the parties shall be afforded a reasonable opportunity to present evidence as to its commercial setting, purpose, and effect, to aid the court in making the determination. (c) (I) In order to support a finding of unconscionability, there must be evidence of some bad faith overreaching on the part of the mortgage broker or mortgage originator such as that which results from an unreasonable inequality of bargaining power or under other circumstances in which there is an absence of meaningful choice on the part of one of the parties, together with contract terms that are, under standard industry practices, unreasonably favorable to the mortgage broker, mortgage originator, or lender. (II) This paragraph (c) shall not apply to an unconscionable act or practice under subsection (1.7) of this section. (3) A violation of this section shall be deemed a deceptive trade practice as provided in section 6-1-105 (1)(uu), C.R.S. (4) The provisions of this section are in addition to and are not intended to supersede the deceptive trade practices actionable at common law or under other statutes of this state. (5) No right or claim arising under this section may be raised or asserted in any proceeding against a bona fide purchaser of such mortgage contract or in any proceeding to obtain an order authorizing sale of property by a public trustee as required by section 38-38-105. (6) The following acts by any real estate agent or real estate broker, as defined in section 12-10-201 (6), in connection with any residential mortgage loan transaction, are prohibited: (a) If directly engaged in negotiating, originating, or offering or attempting to negotiate or originate for a borrower a residential mortgage loan transaction, the real estate agent or real estate broker shall not make a false promise or misrepresentation or conceal an essential or material fact to entice either a borrower or lender to enter into a mortgage loan agreement when the real estate agent or real estate broker actually knew or, under the terms and circumstances of the transaction, reasonably should have known of such falsity, misrepresentation, or concealment. agent or real estate broker shall not make a false promise or misrepresentation or conceal an essential or material fact to entice either a borrower or lender to enter into a mortgage loan agreement when the real estate agent or real estate broker actually knew or, under the terms and circumstances of the transaction, reasonably should have known of such falsity, misrepresentation, or concealment. (b) If not directly engaged in negotiating, originating, or offering or attempting to negotiate or originate for a borrower a residential mortgage loan transaction, the real estate agent or real estate broker shall not make a false promise or misrepresentation or conceal an essential or material fact to entice either a borrower or lender to enter into a mortgage loan agreement when the real estate agent or real estate broker had actual knowledge of such falsity, misrepresentation, or concealment. (7) As used in this section, unless the context otherwise requires: (a) "Consumer" has the meaning set forth in section 5-1-301, C.R.S. (b) "Dwelling" has the meaning set forth in section 5-1-301, C.R.S. (c) "Mortgage broker" has the same meaning as "mortgage loan originator" as set forth in section 12-10-702 (14). (d) "Mortgage lender" has the meaning set forth in section 12-10-702 (13). (e) "Mortgage originator" has the same meaning as "mortgage loan originator" as set forth in section 12-10-702 (14). (f) "Originate" has the same meaning as "originate a mortgage" as set forth in section 12-10-702 (17). (g) "Residential mortgage loan" has the meaning set forth in section 12-10-702 (21).

C.R.S. § 38-40-106 Mortgage servicers - requirements concerning disbursement of insurance proceeds - disclosure of mortgage interest rate - retention of communications - definitions

38-40-106. Mortgage servicers - requirements concerning disbursement of insurance proceeds - disclosure of mortgage interest rate - retention of communications - definitions. (1) As used in this section, unless the context otherwise requires: (a) "Borrower" has the meaning set forth in section 38-38-100.3 (2.5). (b) "Mortgage servicer" means: (I) A mortgage servicer, as defined in section 5-21-103 (4); (II) A mortgage servicer, as defined in section 38-38-100.3 (23.3); or (III) An agent of a mortgage servicer. (c) "Rebuild plan" means a written plan to rebuild a residential property that has been destroyed. (d) "Repair plan" means a written plan to repair a residential property that has been damaged. (e) "Residential property" means a residential property that is the subject of a mortgage. (2) (a) Upon the request of a borrower, a mortgage servicer shall promptly disclose to the borrower the specific conditions under which the mortgage servicer will disburse insurance proceeds to the borrower in the event that a residential property that is the subject of a mortgage is damaged or destroyed and an insurance company pays insurance proceeds to satisfy a claim associated with such damage or destruction. A mortgage servicer may provide the information electronically. (b) In the event that a residential property is damaged or destroyed, a borrower, after consulting with the borrower's contractor, shall create a repair plan or rebuild plan for the residential property. The borrower shall submit the repair plan or rebuild plan to the mortgage servicer for approval. The mortgage servicer shall indicate approval or denial of the plan within thirty days of receipt. The repair plan or rebuild plan must include specific milestones that require the mortgage servicer to disburse insurance proceeds in certain amounts upon reaching the specified milestones, as described in subsections (2)(c)(I)(B) and (2)(d)(II) of this section. If a mortgage servicer employs inspectors for the purpose of determining when such milestones are attained, the mortgage servicer shall notify the borrower of the specific criteria that the inspectors use to make such determinations. (c) (I) If a borrower is not delinquent in making payments on the mortgage or the borrower is less than thirty-one days delinquent in making payments on the mortgage, a mortgage servicer shall disburse the insurance proceeds to the borrower as follows: (A) If the amount of the insurance proceeds is less than or equal to forty thousand dollars, the mortgage servicer shall disburse the entire amount to the borrower in one payment; and (B) If the amount of the insurance proceeds is more than forty thousand dollars, the mortgage servicer shall initially disburse to the borrower an amount that is forty thousand dollars or thirty-three percent of the total proceeds, whichever amount is greater. Thereafter, the mortgage servicer shall disburse the remaining proceeds based on periodic inspections and progress on the work in accordance with the milestones in the repair plan or rebuild plan described in subsection (2)(b) of this section and, where required by federal law or regulation, after approval by the federal home loan banks or applicable federal agency. (II) For the purposes of this subsection (2)(c), if a borrower has made advance payments to a contractor or to purchase materials, as evidenced by paid receipts, the mortgage servicer may reimburse the borrower for such payments. cribed in subsection (2)(b) of this section and, where required by federal law or regulation, after approval by the federal home loan banks or applicable federal agency. (II) For the purposes of this subsection (2)(c), if a borrower has made advance payments to a contractor or to purchase materials, as evidenced by paid receipts, the mortgage servicer may reimburse the borrower for such payments. (d) If a borrower is more than thirty-one days delinquent in making payments on the mortgage, a mortgage servicer shall disburse the insurance proceeds to the borrower as follows: (I) If the amount of the insurance proceeds is less than or equal to five thousand dollars, the mortgage servicer shall disburse the entire amount to the borrower in one payment; and (II) If the amount of the insurance proceeds is more than five thousand dollars, the mortgage servicer shall initially disburse to the borrower an amount that is twenty-five percent of the total proceeds; except that the amount of this initial disbursement may not exceed ten thousand dollars or the amount by which the total proceeds exceed the sum of the unpaid balance on the mortgage, any interest accrued on the mortgage, and any advances made on the mortgage. Thereafter, the mortgage servicer shall disburse the remaining proceeds in amounts not to exceed twenty-five percent of the remaining proceeds, in accordance with the milestones established in the repair plan or the rebuild plan pursuant to subsection (2)(b) of this section; except that the mortgage servicer shall not disburse any remaining proceeds until the mortgage servicer or the mortgage servicer's agent has inspected the repairs, if any, that have been made pursuant to a repair plan established pursuant to subsection (2)(b) of this section. (e) For the purposes of disbursement of insurance proceeds as described in subsections (2)(c) and (2)(d) of this section: (I) A mortgage servicer shall make the first disbursement of insurance proceeds to the borrower: (A) Within fourteen days after the mortgage servicer receives the insurance proceeds if the mortgage is insured by the federal government or securitized by the federal national mortgage association or the federal home loan mortgage corporation; and (B) As soon as reasonably possible and no later than thirty days after the mortgage servicer receives the insurance proceeds if the mortgage is not insured by the federal government or securitized by the federal national mortgage association or the federal home loan mortgage corporation; and (II) A mortgage servicer may disburse funds directly to a designee of a borrower so long as: (A) The designee is agreed to by both the borrower and the mortgage servicer; and (B) The designation is permitted by federal and state law and any associated rules. (f) Notwithstanding any other provision of this section, a mortgage servicer shall promptly disburse to a borrower any amount of insurance proceeds in excess of the remaining amount that the borrower owes on the mortgage unless: (I) The property is an affordable residential rental property that is subject to rent or income restrictions as required by federal, state, local, or political subdivision program requirements; and (II) The insurance proceeds in excess of the remaining amount that the borrower owes on the mortgage are necessary to return the property to the same condition in which the property existed prior to the damage or destruction. ffordable residential rental property that is subject to rent or income restrictions as required by federal, state, local, or political subdivision program requirements; and (II) The insurance proceeds in excess of the remaining amount that the borrower owes on the mortgage are necessary to return the property to the same condition in which the property existed prior to the damage or destruction. (g) A mortgage servicer shall hold in an interest-bearing account any insurance proceeds that the mortgage servicer does not immediately disburse to a borrower as required by this section. Such an account must generate interest at a rate that is not less than the national rate for money market accounts, as determined according to 12 CFR 337.7. A mortgage servicer shall ensure that any interest that is credited to the account is credited and disbursed to the borrower. (3) Immediately upon commencing the servicing of a mortgage, and at any time thereafter at the request of the borrower, a mortgage servicer shall: (a) Disclose to the borrower the interest rate associated with the mortgage; and (b) Provide the borrower, in writing, with a primary point of contact for the purpose of communicating with the mortgage servicer. (4) A mortgage servicer shall retain for at least four years all written and electronic communications between the mortgage servicer and a borrower. (5) Nothing in this section: (a) Prohibits a mortgage servicer from releasing insurance proceeds in amounts greater than required by this section; (b) Prohibits or limits a mortgage servicer from distributing additional money that is made available during a declared state of emergency or natural disaster; or (c) Prohibits a mortgage servicer from complying with federal rules, regulations, and requirements.
Source: Open US Law by Vaquill AI (CC BY 4.0)URL: https://leg.colorado.gov/sites/default/files/images/olls/crs2024-title-38.docxFetched: 10/6/2026

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