On December 4, 2007, the Colorado Division of Real Estate adopted an Emergency Rule interpreting Section 12-61-904.5 of the Colorado Revised Statutes as it relates to reasonable inquiry and tangible net benefit.  The emergency rule applies to mortgage brokers and clarifies what is meant by making a reasonable inquiry concerning a borrower's current and prospective income, existing debts and other obligations, and any other information known to the mortgage broker.  After making such inquiry, the rule states that the broker must use his or her best efforts to recommend, broker or originate a residential mortgage loan that takes into consideration the information submitted by the borrowers.

The Emergency Rule further provides that mortgage brokers shall be deemed in compliance with Section 904.5(1)(b) concerning reasonable inquiry if the mortgage broker discusses all sections contained in the uniform residential loan application and completes a Tangible Net Benefit Disclosure. 

The Division of Real Estate has provided a model Tangible Net Benefit Disclosure on its website.  A mortgage broker may use an alternate disclosure as long as it includes all information required on the model form.

A Tangible Net Benefit Disclosure must be provided to the borrower at the time the borrower completes a loan application.  If the reasonable, tangible net benefit has changed, the Disclosure must again be completed and provided to the borrower prior to the borrower signing the loan closing documents.  This Disclosure must be signed by both the mortgage broker and primary borrower.

Please note that DocMagic, Inc.'s Compliance Department has made available the Division of Real Estate's model Tangible Net Benefit Disclosure (COTNBD.DSC).  The Disclosure has been programmed to appear in all Colorado initial and closing packages where the origination type is broker.