In an ongoing effort to curb mortgage and foreclosure fraud in his state, Colorado's Attorney General announced yesterday a legislative proposal that targets appraisal fraud and mortgage brokers who engage in deceptive trade practices.

Last year, thanks to the efforts of a state-appointed Mortgage Fraud Task Force, new consumer protections were adopted for Colorado families facing foreclosure and stiffer penalties were enacted to address mortgage fraud. This year, Colorado's AG is interested in taking further steps to protect homeowners. The legislation he announced yesterday targets the growing problem of appraisal fraud, and adds additional penalties against mortgage brokers who engage in unfair practices.

Under the proposed legislation:

• Colorado's Division of Real Estate will have the authority to deny or revoke the registration of a mortgage broker who has been prohibited by any court from engaging in deceptive conduct relating to brokering a mortgage loan.
• To address the growing wave of appraisal fraud, the legislation will also prohibit a mortgage broker from compensating, coercing, or intimidating a real estate appraiser in order to obtain an artificially inflated appraisal.
• Finally, the legislation will prohibit anyone else, including realtors, other brokers, lenders, or investors from improperly influencing, or attempting to influence an appraiser and the value of a residence, and prohibits an appraiser from knowingly submitting a false appraisal.
• Violators will be subject to criminal prosecution as a Class One misdemeanor upon a first conviction and a class 6 felony upon a second or subsequent conviction. They will also be subject to civil liability under the state's Consumer Protection Act.

In July 2005, Colorado's AG formed a Mortgage and Foreclosure Fraud Task Force. The Task Force's recommendations subsequently led to new laws requiring that all transactions between homeowners and foreclosure consultants or equity purchasers be in writing, and which prohibits consultants who provide advice or assistance from acquiring any interest in a homeowner's property, and calls for a three-day cooling off period.