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Colorado Stuff – State Regulator of Mortgage Insurance Fraud Fired

April 17, 2010


Erin Toll And The Gutting Of Regulation by Allyn Cooper

The above story appeared on the `Colorado Pol’ website last month. Worth the read

Erin Toll on U-Tube


It concerns the dismissal of Erin Toll, former Director of the Colorado Real Estate Division,

who had been too conscientious in her job of regulating mortgage fraud. A Republican appointed

Erin Toll

by former Governor Bill Owen, Toll took her job seriously. One of her investigations concluded that fellow Republican legislator, State Senator Ted Harvey, a Highlands Ranch Republican, also just happened to be employed as a mortgage broker for American Home Funding, a company that was being investigated by Toll’s office.  American Home Funding and Harvey hired a `powerful local law firm’… hmmm. Wonder who that could be? Not only was Ms. Toll fired by her immediate superviser, Barbara Kelley, quashed Toll’s investigation into Harvey’s firm.

Toll’s firing was deemed important enough to merit national coverage both in Business Week and MSN Money.

Toll was not afraid to take on the real estate  – developer lobby, one of Colorado’s strongest. That lobby, through the good services of two local legislators, Mark Scheffle and Shawn Mitchell – one of the state’s up and coming neo-cons – were able to amend the bill in such a way as to essentially gut it. This was done with no Democratic opposition despite the fact that the Dems control the state legislature.

  • Scheffle’s amendment strips the Director of all the rulemaking, enforcement, and administrative authority over mortgage brokers and placces it in the hands of a seven member board – five of which are required to be mortgage brokers.
  • Mitchell’s contribution to transparency requires that complaints and investigations be closed to public inspection (currently they may be closed at the discretion of the Director)

But why stop there? There are some indications that the real estate lobby will not stop by merely toppling Toll but hope to eliminate the entire agency, the Colorado Real Estate Division, that she headed. So much for improved real estate regulation in the state that brought the nation the Silverado scandal of the 1980s.

It is virtually impossible that Toll could have lost her job without the approval or at least agreement of outgoing Governor Bill Ritter. If this is the case, it is yet one more cynical acts in what has been one of the more mediocre Colorado governorships in recent memory. One has to wonder who lobbied him to approve Toll’s dismissal… and what law firm he will wind up working for when he leaves office.

Toll’s Legacy

The story of Toll’s Legacy is elaborated well on what is called `The Bank Lawyers’ Blog’ on its September 29, 2009 entry from which much of what follows is taken. Last summer Toll, based upon her agency’s investigation, moved to to deactivate the licenses of over half of the state’s licensed mortgage brokers, due to the fact that those brokers hadn’t taken 40 hours of continuing education or passed a written test.

As The Bank Lawyer’s Blog nicely puts it:

Toll was quoted as saying that of the 4,560 brokers whose licenses she yanked, only 85 even took the test and every last one of them flunked it. You’d think that would be a sign of how tough the test was, but there are 4,252 active brokers left in Colorado who, I assume, also had to take the test and who must have passed it. That’s a 98% pass rate, so how tough could the test have been?

Ms. Toll thinks it’s all a matter of consumer protection, and that the people who took the test and failed it are all poorly educated in the ways of mortgage banking.

The bottom line is that we are here to help consumers,” Toll said. “It’s our job to ensure that loan originators are properly educated so they can act in the best interest of the consumer.”

Colorado’s real estate brokers might a tad slow on the draw when it comes to test taking, but that doesn’t mean that they don’t know how to defend their self interest when the going gets tough. The tests which the brokers found so difficult was only the beginning. Toll also used her agency’s subpoena power to get back records of a mortgage broker against whom a complaint was filed. The broker claims the subpoena of such records is unconstitutional and was able to organize a class action suit to block the subpoena. Industry lobbyist Chris Streiff,  director of the Society of Mortage, Affiliate, Real Estate and Title Professionals, claimed that  Ms. Toll of “terrorizing” the industry.

On October 23, 2009, Federal District Judge John Madden ruled in favor of the Colorado Division of Real Estate’s authority to subpoena bank records in what was a short lived victory for Toll and the state agency. Having lost in the courts, the real estate lobby shifted gears and began a lobbying effort to bring down Toll by other means and to strip the state agency of its powers. With Bill Ritter’s assistance, they seemed to have achieved their goal.

Kudo’s to Erin Toll… been a long time since I could give any credit to a Republican….

6 Comments leave one →
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