Banking Law

The "disaster" that Colorado's Director of Real Estate, Erin Toll, warned about a couple of months ago, has come to pass.

The Colorado Division of Real Estate on Monday inactivated 4,560 mortgage broker licenses, about half of the licenses in the state, division Director Erin Toll said.

A total of 4,252 licensed mortgage brokers remained active in Colorado as of Monday.

?We are left with less than half the number we had Friday,? Toll said in an email.

As we pointed out in our earlier post, and as the Denver Business Journal notes, you can't determine how many brokers have left the business or the state due to the nose dive that the residential mortgage markets have taken, or how many might have gone to work for a bank or thrift whose employees don't have to be licensed by the state (and who, consequently, don't have to take and pass 40 hours of classwork). This may be simply a matter of people who can't make a living brokering loans deciding that there are easier ways to skin the cat, like becoming wolverine tamers or cesspool cleaners.

We'll see how this "disaster" in Colorado plays out, both in terms of the effect (if any) on borrowers not being able to find an "affordable loan," and, more critically, on the expected increase in per broker assessments on those licensed brokers who remain. The unintended consequence of tighter state regulation of mortgage brokers might be to make the residential mortgage game one played solely by FDIC-insured institutions.