Erin Toll
Ted Harvey
By Don Knox, STATE BILL COLORADO
DENVER — The apparent benching of the state’s top real estate regulator by her higher-ups at the Colorado Department of Regulatory Agencies is shining a light on both the regulatory and legislative functions of state government.
Is the story of Erin Toll a case of a too-tough regulator overstepping her bounds? Is the story of Sen. Ted Harvey a legislator who’s also a regulated person improperly using the legislative process to strike back?
Is it both? Is it neither?
Today, State Bill Colorado encourages our readers to listen for themselves.
Toll, Colorado’s real-estate regulator, was put on leave last week, but neither she nor her bosses are talking about the reasons. She also was schooled by legislators in another way: Colorado’s Senate preliminarily voted March 12 to return mortgage regulation to a board instead of putting it in Toll’s hands.
What prompted such moves?
Toll, a lawyer and former state insurance regulator, found herself at the center of a political firestorm when she confirmed to the Associated Press earlier this month that she was investigating the mortgage company that employs the senator – and mentioned the senator by name.
That disclosure followed a legislative hearing at which Toll, Harvey and other Republican senators sparred – politely, it should be noted – about two issues concerning Toll’s regulatory behavior.
* Whether a board or a single individual should decide whether enforcement actions go forward for “appraisal management companies.” In Colorado, boards make many regulatory decisions but frequently act lightly upon the industries they regulate. But when it comes to mortgage brokers, Toll is the sole regulator – for which she’s been frequently criticized by the industry.
* A delay in the so-called “sunset review” of the mortgage-broker regulations, first passed in 2006. The review was to take place in 2011, but a pending bill drafted by regulators, including Toll, called for the review to occur three years later. Harvey called the delay “irresponsible.”
Both issues were the subject of a March 2 hearing of the Senate Business, Labor & Technology Committee. SB10-077, the bill regulating the appraisal management companies, was killed eight days later. HB10-1141, the bill making changes to mortgage-broker regulations, was amended to return regulation to a board model and away from a single regulator model. (The bill, as amended, has preliminarily passed the Senate but now conflicts with the version passed a month ago by Colorado’s House and would head to a conference committee.
The March 2 hearing prominently featured Toll and Harvey as well as Republican senators Shawn Mitchell and Mark Scheffel.
The story picks up nearly 10 minutes into the hearing, where Toll describes how the original appraisal-management company bill was amended to go to the director model, instead of the board model.
Press the audio player now.
Toll tells Harvey and the other legislators that the package of changes came at the request of the Colorado Bankers Association, which is why the new version “looks so different.”
At 10:54, Harvey responds: “Thank you Madame Chair. Director Toll, I have a problem with the director model, I was wondering if you can go further about who would be opposed to that, I think when you have a board that has the ability to be a buffer between the industry and a director, kind of an appeals process, if you will, you have a board that is accountable to the community at large, the business community at large. … When you have director scenario, you don’t. I think you can see that come into play with the appraisal board, with the realtor board, … when you have a director model as you do with the mortgage industry, you don’t have an appeals process, you have a dictatorial process where whatever the director says go, and I have a problem with that.
Toll then counters: “First of all, Sen. Harvey, there is a trend across the country and shows the board and commission models aren’t working because it’s foxes watching the henhouse. … You know I’m a robust regulator, this is not my idea, this was originally a board model, this request … was made by the bankers, they felt strongly and I understand that because there are appraisers on the board of real estate appraisers who are not friendly … toward … appraisal management companies, they felt that the appraisal management companies are not held in favor by some, many, of the mom and pop appraisers. … This wasn’t my idea, Sen Harvey.
At this point, 14:07 into the meeting, Sen. Mitchell says: “I guess following on that interesting line of discussion, you’ve commented on input received from the industry which prompted industry to go neutral or in some cases support the bill. That kind of agreement arises in different dynamics, one dynamic is … there are industries that agree to bills because they’re afraid of you, and they’re afraid of you targeting them and they would rather be in your good graces than otherwise.”
At this point, Toll, sounding flustered and with a nervous laugh, defends herself, saying she’s merely enforcing the laws that the legislators themselves have passed: “ I don’t know what to comment, I don’t know what to say, I’m just like I appear. (laughs). I’ve heard some things, and seen some things, and I’ll tell you Sen. Mitchell that I do what I think is right based on what you tell me you want, I don’t make laws I enforce the laws that you tell me are right, if you really want to get into my personal beliefs … we have more than enough laws … and the problem is no one’s enforcing what we have … “
At this point, pause the audio player above.
It’s an hour later, and Sen. Harvey has just questioned mortgage lender lobbyist and former Rep. Fran Coleman about the language moving the sunset date from 2011 to 2014 (or possibly 2013). Coleman tells the senator she agreed to a request to move it to 2013 because there’s a sunset of the entire Real Estate Commission then.
Harvey, who works in the industry, resists the effort to delay the review.
Now press the audio player below.
Harvey: “Like I said before, when we passed this bill in 2007, we said there would be $1.9 million coming in from licensing fees because 9,600 mortgage brokers, there’s a significant change in the market now … I think there’s a significant need to review that with the sunset review, the industry is totally different from when we passed the bill in 2007, to suggest we should push this back to 2014, three years beyond what the law required, is … what’s the word, irresponsible of this body … even pushing it back to 2013 is irresponsible.”
Coleman responds by saying the industry adopted a middle-ground position at the request of the Department of Regulatory Agencies.
Harvey then quizzes committee chair and HB10-1141 sponsor Sen. Lois Tochtrop about the date switch. She responds, in part, “I don’t have a dog in that fight” and Toll is asked to return to the committee to respond.
Toll: “The reason is efficiencies and the state of economy right now. … This will be the seventh mortgage broker bill passed since 2007, when DORA started to do the sunset review of the existing bill, there wasn’t enough time to view the effects of the bill. … the original registration bill was in 2006, in that bill there was a sunset in 2011. In 2007 four more bills were passed, and it stayed 2011. … it didn’t make sense after one year or two years after implementation to be doing a sunset review … 2013 sounded fine, too.
Harvey: But director, I beg to differ, the bill we passed last year was just a compliance bill, it wasn’t anything drastic … what is in statute is we’ll be doing a sunset review of the mortgage licensing 2006, 2007, when we had a fiscal note that said 9,000 mortgage brokers paying these fees and now we have less than 4,000 today we have a totally different industry than we did in 2007, I think it’s totally appropriate for us to have a sunset review to review what is the current industry out there … “
As you can hear, the meeting, at least as the audio record is concerned, is civil, if tense. Toll is at first easy-going and then later flummoxed; Harvey is intent and persistent. Sometime after the meeting, Toll’s interview with the Associated Press sets of an apparent chain of events that includes Harvey’s protests, DORA’s clarification and Toll’s being put on leave. But legislatively, roadblocks are thrown in Toll’s way: The appraisal management bill, SB10-077, is killed eight days later. And 13 days later, HB10-1141 is amended to move mortgage regulation in Colorado to a board model and away from the director model practiced by Toll.
THE MORAL OF THE STORY: From Toll’s vantage, tough regulators are unloved, and this is the clearest evidence yet. From Harvey’s vantage, it’s karma will eventually catch up with regulators who take the hardest possible line. And I’ll add a third moral: Don’t mess with a sitting senator.
