Consumer and Commercial Transactions Ch. 323
Capital letters indicate new material added to existing statutes; dashes through words indicate deletions
from existing statutes and such material not part of act.
CHAPTER 323
_______________
CONSUMER AND COMMERCIAL TRANSACTIONS
_______________
HOUSE BILL 02-1259
BY REPRESENTATIVE(S) Marshall, Bacon, Borodkin, Boyd, Clapp, Coleman, Crane, Daniel, Garcia, Groff, Grossman, Harvey,
Jahn, Lee, Mace, Madden, Miller, Plant, Rhodes, Romanoff, Sanchez, Vigil, Weddig, Williams S., and Young;
also SENATOR(S) Tate, Epps, Fitz-Gerald, Hanna, Linkhart, Teck, Tupa, and Windels.
AN ACT
C
ONCERNING PROTECTION OF CONSUMERS
'
HOME OWNERSHIP EQUITY
.
Be it enacted by the General Assembly of the State of Colorado:
SECTION 1.
Title 5, Colorado Revised Statutes, is amended BY THE
ADDITION OF A NEW ARTICLE to read:
ARTICLE 3.5
Consumer Equity Protection
PART 1
OBLIGOR PROTECTION
5-3.5-101. Definitions.
A
S USED IN THIS ARTICLE
,
UNLESS THE CONTEXT
OTHERWISE REQUIRES
:
(1) "B
RIDGE LOAN
"
MEANS TEMPORARY OR SHORT
-
TERM FINANCING WITH A
MATURITY OF LESS THAN EIGHTEEN MONTHS THAT REQUIRES PAYMENTS OF ONLY
INTEREST UNTIL THE ENTIRE UNPAID BALANCE IS DUE AND PAYABLE
.
(2) "C
OVERED LOAN
"
MEANS A CONSUMER CREDIT MORTGAGE LOAN TRANSACTION
INVOLVING PROPERTY LOCATED WITHIN THIS STATE THAT IS CONSIDERED A
MORTGAGE UNDER SECTION
152
OF THE FEDERAL
"H
OME
O
WNERSHIP AND
E
QUITY
P
ROTECTION
A
CT OF
1994",
15
U.S.C.
SEC
.
1602
(aa),
AS AMENDED
,
AND
REGULATIONS ADOPTED PURSUANT THERETO BY THE FEDERAL RESERVE BOARD
,
INCLUDING
,
WITHOUT LIMITATION
,
12
CFR
226.32,
AS AMENDED
;
EXCEP T T HAT IF TH E
TOTAL POINTS AND FEES ON A LOAN PAID BY THE OBLIGOR AT OR BEFORE CLOSING
EXCEED SIX PERCENT OF THE TOTAL LOAN AMOUNT
,
SUCH LOAN SHALL BE DEEMED TO
Ch. 323 Consumer and Commercial Transactions
BE A COVERED LOAN IF THE LOAN OTHERWISE MEETS THE REQUIREMENTS OF THIS
SUBSECTION
(2).
(3) "L
ENDER
"
MEANS ANY INDIVIDUAL OR ENTITY THAT ORIGINATES ONE OR MORE
COVERED LOANS
.
T
HE INDIVIDUAL OR ENTITY TO WHOM A COVERED LOAN IS
INITIALLY PAYABLE
,
EITHER ON THE FACE OF THE NOTE OR CONTRACT OR BY
AGREEMENT WHEN THERE IS NO NOTE OR CONTRACT
,
SHALL BE DEEMED TO BE THE
LENDER
.
(4) "M
ORTGAGE BROKER
"
MEANS A PERSON OTHER THAN AN EMPLOYEE OR
EXCLUSIVE AGENT OF A LENDER WHO
,
FOR COMPENSATION
,
BRINGS AN OBLIGOR AND
LENDER TOGETHER TO OBTAIN A COVERED LOAN
.
(5) "O
BLIGOR
"
MEANS EACH OBLIGOR
,
CO
-
OBLIGOR
,
CO
-
SIGNER
,
OR GRANTOR
OBLIGATED TO REPAY A COVERED LOAN
.
(6) "P
OLITICAL SUBDIVISION
"
MEANS A COUNTY
,
CITY AND COUNTY
,
CITY
,
TOWN
,
SERVICE AUTHORITY
,
SCHOOL DISTRICT
,
LOCAL IMPROVEMENT DISTRICT
,
LAW
ENFORCEMENT AUTHORITY
,
CITY OR COUNTY HOUSING AUTHORITY
,
OR WATER
,
SANITATION
,
FIRE PROTECTION
,
METROPOLITAN
,
IRRIGATION
,
DRAINAGE
,
OR OTHER
SPECIAL DISTRICT OR ANY OTHER KIND OF MUNICIPAL
,
QUASI
-
MUNICIPAL
,
OR PUBLIC
CORPORATION ORGANIZED PURSUANT TO LAW
.
(7) "P
RINCIPAL BALANCE
"
MEANS THE AMOUNT FINANCED PLUS PREPAID FINANCE
CHARGES AS DEFINED IN THE FEDERAL
"T
RUTH IN
L
ENDING
A
CT
",
15
U.S.C.
SEC
.
1601,
ET
.
SEQ
.,
AS AMENDED
.
(8) "S
ERVICER
"
HAS THE SAME MEANING AS SET FORTH IN SECTION
2605
(i)
(2)
OF
THE FEDERAL
"R
EAL
E
STATE
S
ETTLEMENT
P
ROCEDURES
A
CT OF
1974",
12
U.S.C.
SEC
.
2601,
ET
.
SEQ
.,
AS AMENDED
.
5-3.5-102. Protection of obligors.
(1) A
COVERED LOAN IS SUBJECT TO THE
FOLLOWING LIMITATIONS
:
(a)
Limitation on balloon payment.
N
O COVERED LOAN MAY CONTAIN A
PROVISION FOR A SCHEDULED PAYMENT THAT IS MORE THAN TWICE AS LARGE AS THE
AVERAGE OF EARLIER SCHEDULED MONTHLY PAYMENTS
,
UNLESS SUCH BALLOON
PAYMENT BECOMES DUE AND PAYABLE NOT LESS THAN ONE HUNDRED TWENTY
MONTHS AFTER THE DATE OF EXECUTION OF THE LOAN
.
T
HIS PROHIBITION DOES NOT
APPLY WHEN THE PAYMENT SCHEDULE IS ADJUSTED TO ACCOUNT FOR THE SEASONAL
OR IRREGULAR INCOME OF THE OBLIGOR OR IF THE PURPOSE OF THE LOAN IS A BRIDGE
LOAN CONNECTED WITH
,
OR RELATED TO
,
THE ACQUISITION OR CONSTRUCTION OF A
DWELLING INTENDED TO BECOME THE OBLIGOR
'
S PRINCIPAL DWELLING
.
(b)
No call provision.
N
O COVERED LOAN MAY CONTAIN A CALL PROVISION THAT
PERMITS THE LENDER
,
IN ITS SOLE DISCRETION
,
TO ACCELERATE THE INDEBTEDNESS
.
T
HIS PROHIBITION SHALL NOT APPLY WHEN
:
(I) A
CCELERATION OF REPAYMENT OF THE LOAN IS JUSTIFIED
:
(A) B
Y DEFAULT IN WHICH THE OBLIGOR FAILS TO MEET THE REPAYMENT TERMS
Consumer and Commercial Transactions Ch. 323
OF THE AGREEMENT FOR ANY OUTSTANDING BALANCE
;
OR
(B) P
URSUANT TO A DUE
-
ON
-
SALE PROVISION
;
(II) T
HERE IS FRAUD OR MATERIAL MISREPRESENTATION BY AN OBLIGOR IN
CONNECTION WITH THE LOAN
;
(III) T
HERE IS A PROVISION PERMITTING ACCELERATION IF THE LENDER
,
IN GOOD
FAITH
,
BELIEVES ITSELF TO BE MATERIALLY INSECURE OR BELIEVES THAT THE
PROSPECT OF FUTURE PAYMENT HAS BECOME MATERIALLY IMPAIRED
;
OR
(IV) T
HERE IS ANY ACTION OR INACTION BY THE OBLIGOR THAT ADVERSELY
AFFECTS THE LENDER
'
S SECURITY FOR THE LOAN OR ANY RIGHTS OF THE LENDER IN
SUCH SECURITY
.
(c)
No negative amortization.
N
O COVERED LOAN MAY CONTRACT FOR A
PAYMENT SCHEDULE WITH REGULAR PERIODIC PAYMENTS THAT CAUSE THE PRINCIPAL
BALANCE TO INCREASE
;
EXCEPT THAT THIS PARAGRAPH
(c)
SHALL NOT PROHIBIT
NEGATIVE AMORTIZATION AS A CONSEQUENCE OF A TEMPORARY FORBEARANCE OR
RESTRUCTURE SOUGHT BY THE OBLIGOR
.
(d)
No increased interest rate upon default.
N
O COVERED LOAN MAY
CONTRACT FOR ANY INCREASE IN THE INTEREST RATE AS A RESULT OF A DEFAULT
;
EXCEPT THAT THIS PARAGRAPH
(d)
SHALL NOT APPLY TO PERIODIC INTEREST RATE
CHANGES IN A VARIABLE RATE LOAN THAT IS OTHERWISE CONSISTENT WITH THE
PROVISIONS OF THE LOAN AGREEMENT IF THE CHANGE IN THE INTEREST RATE IS NOT
OCCASIONED BY THE EVENT OF DEFAULT OR A PERMISSIBLE ACCELERATION OF THE
INDEBTEDNESS
.
(e)
Limitations on mandatory arbitration clauses.
N
O COVERED LOAN MAY BE
SUBJECT TO A MANDATORY ARBITRATION CLAUSE THAT
:
(I) D
OES NOT COMPLY WITH RULES SET FORTH BY A NATIONALLY RECOGNIZED
ARBITRATION ORGANIZATION SUCH AS THE
A
MERICAN ARBITRATION ASSOCIATION
;
(II) D
OES NOT REQUIRE THE ARBITRATION PROCEEDING TO BE CONDUCTED
:
(A) W
ITHIN THE FEDERAL JUDICIAL DISTRICT IN WHICH THE SUBJECT PROPERTY IS
LOCATED
;
(B) I
N THE CITY NEAREST THE OBLIGOR
'
S RESIDENCE WHERE A FEDERAL DISTRICT
COURT IS LOCATED
;
OR
(C) A
T SUCH OTHER LOCATION AS MAY BE MUTUALLY AGREED UPON BY THE
PARTIES
;
(III) D
OES NOT REQUIRE THE LENDER TO CONTRIBUTE AT LEAST FIFTY PERCENT OF
THE AMOUNT OF ANY FILING FEE
;
AND
(IV) D
OES NOT REQUIRE THE LENDER TO PAY STANDARD DAILY ARBITRATION FEES
,
BOTH ITS OWN AND THOSE OF THE OBLIGOR
,
FOR AT LEAST THE FIRST DAY OF
Ch. 323 Consumer and Commercial Transactions
ARBITRATION
.
(f)
No advance payments.
N
O COVERED LOAN MAY INCLUDE TERMS UNDER
WHICH ANY PERIODIC PAYMENTS REQUIRED UNDER THE LOAN ARE PAID IN ADVANCE
FROM THE LOAN PROCEEDS PROVIDED TO THE OBLIGOR
.
(g)
Limitations on prepayment fees.
(I)
First thirty-six months only.
A
PREPAYMENT FEE OR PENALTY SHALL BE PERMITTED ONLY ON A REFINANCE TO A
DIFFERENT LENDER OTHER THAN PURSUANT TO A SALE AND ONLY DURING THE FIRST
THIRTY
-
SIX MONTHS AFTER THE DATE OF EXECUTION OF A COVERED LOAN
.
P
REPAYMENT FEES AND PENALTIES SHALL NOT EXCEED SIX MONTHS
'
INTEREST FOR
PREPAYMENT WITHIN THE FIRST THREE YEARS OF THE LOAN
.
T
HE PREPAYMENT FEES
OR PENALTIES PERMITTED BY THIS PARAGRAPH
(g)
SHALL APPLY ONLY TO COVERED
LOANS THAT ARE SECURED BY A FIRST MORTGAGE
,
DEED OF TRUST
,
OR SECURITY
INTEREST TO REFINANCE
,
BY AMENDMENT
,
PAYOFF
,
OR OTHERWISE
,
AN EXISTING
LOAN MADE TO FINANCE THE ACQUISITION OR CONSTRUCTION OF A DWELLING
,
INCLUDING A REFINANCE LOAN PROVIDING ADDITIONAL SUMS OF MONEY FOR ANY
PURPOSE
,
REGARDLESS OF WHETHER RELATED TO ACQUISITION OR CONSTRUCTION
.
N
O PREPAYMENT FEES OR PENALTIES SHALL BE INCLUDED IN THE LOAN DOCUMENTS
OR CHARGED TO THE OBLIGOR FOR PREPAYMENT
:
(A) A
FTER THE THIRD YEAR OF THE LOAN
;
(B) P
URSUANT TO A REFINANCE WITH THE SAME LENDER
;
OR
(C) T
HAT IS PARTIAL
.
(II)
No prepayment fees for certain refinancing.
N
O PREPAYMENT FEE OR
PENALTY MAY BE CHARGED ON A REFINANCING OF A COVERED LOAN IF THE COVERED
LOAN BEING REFINANCED IS OWNED BY THE REFINANCING LENDER AT THE TIME OF
SUCH REFINANCING
.
(III)
Lender must offer choice.
A
LENDER SHALL NOT INCLUDE A PREPAYMENT
PENALTY FEE IN A COVERED LOAN UNLESS THE LENDER OFFERS THE OBLIGOR THE
OPTION OF CHOOSING A LOAN PRODUCT WITHOUT A PREPAYMENT PENALTY FEE
.
A
LENDER SHALL BE DEEMED TO HAVE COMPLIED WITH THIS REQUIREMENT IF THE
OBLIGOR RECEIVES AND EXECUTES THE FOLLOWING DISCLOSURE
,
WHICH MAY BE
INCORPORATED WITH ANY OTHER REQUIRED DISCLOSURE
:
"LOAN
PRODUCT
CHOICE
I
WAS PROVIDED WITH AN OFFER TO ACCEPT A PRODUCT BOTH WITH AND WITHOUT
A PREPAYMENT PENALTY PROVISION
.
I
HAVE CHOSEN TO ACCEPT THE PRODUCT
____
WITH
/
____
WITHOUT A PREPAYMENT PENALTY
."
5-3.5-103. Restricted acts and practices.
(1) T
HE FOLLOWING ACTS AND
PRACTICES ARE PROHIBITED IN THE MAKING OF A COVERED LOAN
:
(a)
No lending without cautionary notice.
(I) A
LENDER MAY NOT MAKE A
COVERED LOAN UNLESS THE LENDER OR A MORTGAGE BROKER HAS GIVEN THE
FOLLOWING NOTICE
,
OR A SUBSTANTIALLY SIMILAR NOTICE
,
IN WRITING TO THE
Consumer and Commercial Transactions Ch. 323
OBLIGOR WITHIN A REASONABLE PERIOD OF TIME AFTER DETERMINING THAT THE LOAN
WOULD RESULT IN A COVERED LOAN
,
BUT NO LATER THAN THE TIME BY WHICH THE
NOTICE IS REQUIRED UNDER THE NOTICE PROVISION CONTAINED IN
12
CFR
226.31
(c),
AS AMENDED
:
"
CONSUMER CAUTION
I
F YOU OBTAIN THIS LOAN
,
THE LENDER WILL HAVE A MORTGAGE IN
C
OLORADO
;
THIS IS A DEED OF TRUST ON YOUR HOME
.
Y
OU COULD LOSE YOUR HOME
,
AND ANY
MONEY YOU HAVE PUT INTO IT
,
IF YOU DO NOT MEET YOUR OBLIGATIONS UNDER THE
LOAN
.
M
ORTGAGE LOAN RATES AND CLOSING COSTS AND FEES VARY BASED ON MANY
FACTORS
,
INCLUDING YOUR PARTICULAR CREDIT AND FINANCIAL CIRCUMSTANCES
,
YOUR EARNINGS HISTORY
,
THE LOAN
-
TO
-
VALUE REQUESTED
,
AND THE TYPE OF
PROPERTY THAT WILL SECURE YOUR LOAN
.
T
HE LOAN RATE AND FEES COULD VARY
BASED ON WHICH LENDER OR BROKER YOU SELECT
.
Y
OU ARE NOT REQUIRED TO COMPLETE ANY LOAN AGREEMENT MERELY BECAUSE
YOU HAVE RECEIVED THESE DISCLOSURES OR HAVE SIGNED A LOAN APPLICATION
.
I
F
YOU PROCEED WITH THIS MORTGAGE LOAN
,
YOU SHOULD ALSO REMEMBER THAT YOU
MAY FACE SERIOUS FINANCIAL RISKS IF YOU USE THIS LOAN TO PAY OFF CREDIT CARD
DEBTS AND OTHER DEBTS IN CONNECTION WITH THIS TRANSACTION AND THEN LATER
INCUR SIGNIFICANT NEW CREDIT CARD CHARGES OR OTHER DEBTS
.
I
F YOU CONTINUE
TO ACCUMULATE DEBT AFTER THIS LOAN IS CLOSED AND THEN EXPERIENCE FINANCIAL
DIFFICULTIES
,
YOU COULD LOSE YOUR HOME AND ANY EQUITY YOU HAVE IN IT IF YOU
DO NOT MEET YOUR MORTGAGE LOAN OBLIGATIONS
.
P
ROPERTY TAXES AND HOMEOWNER
'
S INSURANCE ARE YOUR RESPONSIBILITY
.
N
OT
ALL LENDERS PROVIDE ESCROW SERVICES FOR THESE PAYMENTS
.
Y
OU SHOULD ASK
YOUR LENDER ABOUT THESE SERVICES
.
Y
OUR PAYMENTS ON EXISTING DEBTS CONTRIBUTE TO YOUR CREDIT RATINGS
.
Y
OU
SHOULD NOT ACCEPT ANY ADVICE TO IGNORE YOUR REGULAR PAYMENTS TO YOUR
EXISTING CREDITORS
."
(II) I
T SHALL BE A REBUTTABLE PRESUMPTION THAT A LENDER OR BROKER HAS MET
ITS OBLIGATION TO PROVIDE THIS DISCLOSURE IF THE CONSUMER PROVIDES THE
LENDER OR BROKER WITH A SIGNED ACKNOWLEDGMENT OF RECEIPT OF A COPY OF THE
NOTICE SET FORTH IN SUBPARAGRAPH
(I)
OF THIS PARAGRAPH
(a).
(b)
No lending without due regard to repayment ability.
(I) A
LENDER MAY
NOT MAKE A COVERED LOAN TO A CONSUMER BASED ON THE CONSUMER
'
S
COLLATERAL WITHOUT REGARD TO THE CONSUMER
'
S REPAYMENT ABILITY
,
INCLUDING
THE CONSUMER
'
S CURRENT AND EXPECTED INCOME
,
CURRENT OBLIGATIONS
,
AND
EMPLOYMENT
.
(II) T
HERE IS A PRESUMPTION THAT A CREDITOR HAS VIOLATED THIS PARAGRAPH
(b)
IF THE CREDITOR ENGAGES IN A PATTERN OR PRACTICE OF MAKING LOANS SUBJECT
TO
12
CFR
226.32
WITHOUT VERIFYING AND DOCUMENTING CONSUMERS
'
REPAYMENT
ABILITIES
.
(III) (A)
I
N THE CASE OF A STATED INCOME LOAN
,
THE REASONABLE BASIS FOR
Ch. 323 Consumer and Commercial Transactions
BELIEVING THAT THERE ARE SUFFICIENT FUNDS TO SUPPORT THE COVERED LOAN MAY
NOT BE BASED SOLELY ON THE INCOME STATED BY THE OBLIGOR
,
BUT MAY INCLUDE
OTHER INFORMATION IN THE POSSESSION OF THE LENDER AFTER THE SOLICITATION OF
ALL INFORMATION THAT THE LENDER CUSTOMARILY SOLICITS IN CONNECTION WITH
STATED INCOME LOANS
.
A
LENDER SHALL NOT KNOWINGLY OR WILLFULLY
ORIGINATE A COVERED LOAN AS A STATED INCOME LOAN WITH THE INTENT OF
EVADING THIS SUBPARAGRAPH
(III).
(B) A
PERSON WHO WILLFULLY AND KNOWINGLY GIVES FALSE OR INACCURATE
INFORMATION OR FAILS TO PROVIDE INFORMATION THAT THE PERSON IS REQUIRED TO
DISCLOSE PURSUANT TO APPLICABLE LAW MAY HAVE VIOLATED AND MAY BE SUBJECT
TO PENALTIES ESTABLISHED IN
15
U.S.C.
SEC
.
1611.
(c)
Refinancing within a one-year period.
W
ITHIN ONE YEAR AFTER HAVING
EXTENDED CREDIT SUBJECT TO
12
CFR
226.32,
NO LENDER SHALL REFINANCE ANY
LOAN SUBJECT TO
12
CFR
226.32
TO THE SAME OBLIGOR INTO ANOTHER LOAN
SUBJECT TO
12
CFR
226.32
UNLESS THE REFINANCING IS IN THE OBLIGOR
'
S INTEREST
.
A
N ASSIGNEE HOLDING OR SERVICING AN EXTENSION OF MORTGAGE CREDIT SUBJECT
TO
12
CFR
226.32
SHALL NOT
,
FOR THE REMAINDER OF THE ONE
-
YEAR PERIOD
FOLLOWING THE DATE OF ORIGINATION OF THE CREDIT
,
REFINANCE ANY LOAN SUBJECT
TO
12
CFR
226.32
TO THE SAME OBLIGOR INTO ANOTHER LOAN SUBJECT TO
12
CFR
226.32
UNLESS THE REFINANCING IS IN THE OBLIGOR
'
S INTEREST
.
A
CREDITOR OR
ASSIGNEE SHALL NOT ENGAGE IN ACTS OR PRACTICES TO EVADE THIS PARAGRAPH
(c),
INCLUDING A PATTERN OR PRACTICE OF ARRANGING FOR THE REFINANCING OF ITS
OWN LOANS BY AFFILIATED OR UNAFFILIATED CREDITORS
,
OR MODIFYING A LOAN
AGREEMENT
,
REGARDLESS OF WHETHER THE EXISTING LOAN IS SATISFIED AND
REPLACED BY THE NEW LOAN
,
AND CHARGING A FEE
.
(d)
No refinancing certain low-rate loans.
A
LENDER SHALL NOT REPLACE OR
CONSOLIDATE A ZERO INTEREST RATE
,
OR OTHER LOW
-
RATE
,
LOAN MADE BY A
GOVERNMENTAL OR NONPROFIT LENDER WITH A COVERED LOAN WITHIN THE FIRST
TEN YEARS AFTER THE LOW
-
RATE LOAN WAS MADE UNLESS THE CURRENT HOLDER OF
THE LOAN CONSENTS IN WRITING TO THE REFINANCING
.
F
OR PURPOSES OF THIS
PARAGRAPH
(d),
A
"
LOW
-
RATE
"
LOAN IS A LOAN THAT CARRIES A CURRENT INTEREST
RATE TWO PERCENTAGE POINTS OR MORE BELOW THE CURRENT YIELD ON
U
NITED
S
TATES DEPARTMENT OF THE TREASURY SECURITIES WITH A COMPARABLE MATURITY
.
I
F THE LOAN
'
S CURRENT INTEREST RATE IS EITHER A DISCOUNTED INTRODUCTORY
RATE OR A RATE THAT AUTOMATICALLY STEPS UP OVER TIME
,
THEN THE
FULLY
-
INDEXED RATE OR THE FULLY STEPPED
-
UP RATE
,
AS APPROPRIATE
,
SHOULD BE
USED IN LIEU OF THE CURRENT RATE TO DETERMINE WHETHER A LOAN IS A LOW
-
RATE
LOAN
.
(e)
Restrictions on covered loan proceeds to pay home improvement
contracts.
A
LENDER SHALL NOT PAY A CONTRACTOR UNDER A HOME
-
IMPROVEMENT
CONTRACT FROM THE PROCEEDS OF A COVERED LOAN OTHER THAN BY AN
INSTRUMENT PAYABLE TO THE OBLIGOR OR JOINTLY TO THE OBLIGOR AND THE
CONTRACTOR OR
,
AT THE ELECTION OF THE OBLIGOR
,
THROUGH A THIRD
-
PARTY
ESCROW AGENT IN ACCORDANCE WITH TERMS ESTABLISHED IN A WRITTEN
AGREEMENT SIGNED BY THE OBLIGOR
,
THE LENDER
,
AND THE CONTRACTOR PRIOR TO
THE DISBURSEMENT OF FUNDS TO THE CONTRACTOR
.
Consumer and Commercial Transactions Ch. 323
(f)
No financing of credit insurance.
N
O COVERED LOAN MAY INCLUDE
,
DIRECTLY OR INDIRECTLY
,
FINANCING OF ANY PREMIUMS FOR ANY CREDIT LIFE
,
CREDIT DISABILITY
,
CREDIT PROPERTY
,
OR CREDIT UNEMPLOYMENT INSURANCE
,
ANY
OTHER LIFE OR HEALTH INSURANCE PRODUCTS
,
OR ANY PAYMENTS FOR ANY DEBT
CANCELLATION OR SUSPENSION AGREEMENT OR CONTRACTS
;
EXCEPT THAT
CALCULATED INSURANCE PREMIUMS OR DEBT CANCELLATION OR SUSPENSION FEES
PAID ON A MONTHLY BASIS SHALL NOT BE CONSIDERED TO HAVE BEEN FINANCED BY
THE LENDER FOR PURPOSES OF THIS PARAGRAPH
(f).
(g)
No recommending default.
N
O LENDER SHALL RECOMMEND OR ENCOURAGE
DEFAULT ON AN EXISTING LOAN OR OTHER DEBT PRIOR TO AND IN CONNECTION WITH
THE CLOSING OR PLANNED CLOSING OF A COVERED LOAN THAT REFINANCES ALL OR
ANY PORTION OF SUCH EXISTING LOAN OR DEBT
.
(h)
No fee for payoff quote.
N
O CREDITOR MAY CHARGE A FEE FOR INFORMING
OR TRANSMITTING TO ANY PERSON THE BALANCE DUE TO PAY OFF A COVERED LOAN
OR TO PROVIDE A RELEASE UPON PREPAYMENT
.
A
CREDITOR SHALL PROVIDE A
PAYOFF BALANCE WITHIN A REASONABLE TIME AFTER A REQUEST
,
BUT IN ANY EVENT
NOT MORE THAN FIVE BUSINESS DAYS AFTER A WRITTEN REQUEST
.
5-3.5-104. Reporting to credit bureaus.
A
LENDER OR ITS SERVICER SHALL
REPORT AT LEAST QUARTERLY BOTH THE FAVORABLE AND UNFAVORABLE PAYMENT
HISTORY INFORMATION OF THE OBLIGOR ON PAYMENTS DUE TO THE LENDER ON A
COVERED LOAN TO A NATIONALLY RECOGNIZED CONSUMER CREDIT REPORTING
AGENCY
.
T
HIS SECTION SHALL NOT PREVENT A LENDER OR ITS SERVICER FROM
AGREEING WITH THE OBLIGOR NOT TO REPORT SPECIFIED PAYMENT HISTORY
INFORMATION IN THE EVENT OF A RESOLVED OR UNRESOLVED DISPUTE WITH AN
OBLIGOR
,
AND SHALL NOT APPLY TO COVERED LOANS HELD OR SERVICED BY A
LENDER FOR LESS THAN NINETY DAYS
.
PART 2
ENFORCEMENT AND LIABILITY
5-3.5-201. Enforcement - liability.
T
HE ATTORNEY GENERAL AND ANY OBLIGOR
OF A COVERED LOAN MAY ENFORCE THIS ARTICLE WITH RESPECT TO SUCH COVERED
LOAN IN THE MANNER PROVIDED FOR VIOLATIONS OF THE FEDERAL
"H
OME
O
WNERSHIP AND
E
QUITY
P
ROTECTION
A
CT OF
1994",
15
U.S.C.
SEC
.
1639,
AND
REGULATIONS ADOPTED PURSUANT THERETO BY THE FEDERAL RESERVE BOARD
,
INCLUDING
,
WITHOUT LIMITATION
,
12
CFR
226.32,
AS SET FORTH IN THE FEDERAL
"T
RUTH IN
L
ENDING
A
CT
",
15
U.S.C.
SEC
.
1640,
AND REGULATIONS ADOPTED
PURSUANT THERETO BY THE FEDERAL RESERVE BOARD
,
INCLUDING THE PROVISIONS
ON CIVIL LIABILITY
,
CLASS ACTIONS
,
RECISSION
,
CORRECTION
,
AND BONA FIDE ERROR
.
P
ERSONS ENGAGED IN THE PURCHASE
,
SALE
,
ASSIGNMENT
,
SECURITIZATION
,
OR
SERVICING OF COVERED LOANS SHALL BE LIABLE UNDER THIS ARTICLE FOR THE
ACTION OR INACTION OF PERSONS ORIGINATING SUCH LOANS ONLY IN THE MANNER
AND TO THE EXTENT PROVIDED FOR VIOLATION OF THE FEDERAL
"H
OME
O
WNERSHIP
AND
E
QUITY
P
ROTECTION
A
CT OF
1994"
AND THE FEDERAL
"T
RUTH IN
L
ENDING
A
CT
",
15
U.S.C.
SEC
.
1641,
AND REGULATIONS ADOPTED PURSUANT THERETO BY THE
FEDERAL RESERVE BOARD
.
Ch. 323 Consumer and Commercial Transactions
PART 3
MISCELLANEOUS PROVISIONS
5-3.5-301. Effective date - applicability.
S
ECTION
5-3.5-303
IS INTENDED TO
RESTATE AND CONFIRM THE EXISTING LAW OF THIS STATE
,
NAMELY THAT THE LAWS
OF THIS STATE RELATING TO THE FINANCIAL AND LENDING ACTIVITIES ARE TO BE
APPLIED ON A UNIFORM
,
STATEWIDE BASIS
.
P
ARTS
1
AND
2
OF THIS ARTICLE SHALL
TAKE EFFECT
J
ANUARY
1,
2003.
T
HIS PART
3
SHALL TAKE EFFECT UPON PASSAGE
.
T
HIS ARTICLE SHALL APPLY TO COVERED LOANS OFFERED OR ENTERED INTO ON OR
AFTER
J
ANUARY
1,
2003.
5-3.5-302. Severability.
T
HE PROVISIONS OF THIS ARTICLE ARE SEVERABLE AND
IF ANY OF ITS PROVISIONS ARE HELD UNCONSTITUTIONAL
,
THE DECISION OF THE COURT
SHALL NOT AFFECT OR IMPAIR ANY OF THE REMAINING PROVISIONS OF THIS ARTICLE
.
I
T IS HEREBY DECLARED TO BE THE LEGISLATIVE INTENT THAT THIS ARTICLE WOULD
HAVE BEEN ADOPTED IF THE UNCONSTITUTIONAL PROVISIONS HAD NOT BEEN
INCLUDED
.
5-3.5-303. Relationship to other laws.
(1)
General rule.
A
LL POLITICAL
SUBDIVISIONS OF THIS STATE
,
INCLUDING MUNICIPALITIES
,
SHALL BE PROHIBITED
FROM ENACTING AND ENFORCING ORDINANCES
,
RESOLUTIONS
,
AND REGULATIONS
PERTAINING TO LENDING ACTIVITIES
.
(2)
Preemption.
A
NY PROVISION OF THIS ARTICLE PREEMPTED BY FEDERAL LAW
WITH RESPECT TO A NATIONAL BANK OR FEDERAL SAVINGS ASSOCIATION SHALL ALSO
,
TO THE SAME EXTENT
,
NOT APPLY TO AN OPERATING SUBSIDIARY OF A NATIONAL
BANK OR FEDERAL SAVINGS ASSOCIATION THAT SATISFIES THE REQUIREMENTS FOR
OPERATING SUBSIDIARIES ESTABLISHED IN
12
CFR
5.34,
RELATING TO OPERATING
SUBSIDIARIES
,
OR
12
CFR
559.3,
RELATING TO THE CHARACTERISTICS OF AND
REQUIREMENTS FOR SUBORDINATE ORGANIZATIONS OF FEDERAL SAVINGS
ASSOCIATIONS
,
NOR TO A BANK CHARTERED UNDER THE LAWS OF
C
OLORADO OR ANY
OPERATING SUBSIDIARY OF SUCH A STATE CHARTERED BANK
.
(3)
Interpretation.
T
HE PROVISIONS OF THIS ARTICLE SHALL BE INTERPRETED AND
APPLIED TO THE FULLEST EXTENT PRACTICAL IN A MANNER CONSISTENT WITH
APPLICABLE FEDERAL LAWS AND REGULATIONS
,
AND SHALL NOT BE DEEMED TO
CONSTITUTE AN ATTEMPT TO OVERRIDE FEDERAL LAW
.
SECTION 2.
Article 40 of title 38, Colorado Revised Statutes, is amended BY
THE ADDITION OF A NEW SECTION to read:
38-40-105. Prohibited acts by originators of certain mortgage loans.
(1) T
HE
FOLLOWING ACTS BY ANY MORTGAGE BROKER OR MORTGAGE ORIGINATOR 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) T
O 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
;
Consumer and Commercial Transactions Ch. 323
(b) T
O KNOWINGLY 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
;
(c) T
O 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) T
O FACILITATE THE CONSUMMATION OF A MORTGAGE LOAN AGREEMENT THAT
IS UNCONSCIONABLE GIVEN THE TERMS AND CIRCUMSTANCES OF THE TRANSACTION
.
(2) (a) I
F 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) W
HEN 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
N ORDER TO SUPPORT A FINDING OF UNCONSCIONABILITY
,
THERE MUST BE
EVIDENCE OF SOME OVERREACHING ON THE PART OF THE MORTGAGE BROKER OR
MORTGAGE ORIGINATOR SUCH AS THAT WHICH RESULTS FROM AN 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 UNREASONABLY FAVORABLE TO THE MORTGAGE
BROKER
,
MORTGAGE ORIGINATOR
,
OR LENDER
.
(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) T
HE 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
.
SECTION 3.
6-1-105 (1), Colorado Revised Statutes, is amended BY THE
ADDITION OF A NEW PARAGRAPH to read:
6-1-105. Deceptive trade practices.
(1) A person engages in a deceptive trade
practice when, in the course of such person's business, vocation, or occupation, such
person:
(uu) V
IOLATES SECTION
38-40-105,
C.R.S.
Ch. 323 Consumer and Commercial Transactions
SECTION 4.
6-1-110, Colorado Revised Statutes, is amended BY THE
ADDITION OF A NEW SUBSECTION to read:
6-1-110. Restraining orders - injunctions - assurances of discontinuance.
(3) W
HEN THE ATTORNEY GENERAL OR A DISTRICT ATTORNEY SHOWS BY A
PREPONDERANCE OF EVIDENCE THAT A MORTGAGE BROKER OR MORTGAGE
ORIGINATOR HAS CONTINUED TO CONDUCT THE BUSINESS OF ORIGINATING MORTGAGE
LOANS IN VIOLATION OF SECTION
38-40-105,
C.R.S.,
AFTER HAVING BEEN
PREVIOUSLY ENJOINED FROM PRACTICES IN VIOLATION OF SUCH SECTION
,
THE
ATTORNEY GENERAL OR DISTRICT ATTORNEY MAY
,
IN ADDITION TO ANY OTHER
REMEDIES
,
APPLY FOR AND OBTAIN
,
IN THE COURT THAT HAS PREVIOUSLY ISSUED AN
INJUNCTION
,
A FURTHER INJUNCTION AGAINST CONTINUING TO PARTICIPATE IN THE
BUSINESS OF ORIGINATING MORTGAGE LOANS FOR UP TO TWO YEARS
.
SECTION 5.
Safety clause.
The general assembly hereby finds, determines, and
declares that this act is necessary for the immediate preservation of the public peace,
health, and safety.
Approved: June 7, 2002
