Fact Sheet HB12-1156

Support HB12-1156

Restores Integrity to the Foreclosure Process

HB12-1156 will significantly improve the current foreclosure statute and return integrity to our system by providing Colorado residents with critical information regarding foreclosure and creating transparency and accountability in the process. 

Servicing employees have been signing foreclosure documents en masse, without appropriate verification and, in some cases, even without appropriate signatures.  Servicers are foreclosing, therefore, without offering proof (1) that the lender is the holder of the note and therefore has the right to foreclose; and (2) that the borrower is even in default.  Similar sloppy and fraudulent practices exist throughout the servicing process, from posting of payments and charging of fees to the evaluation for loss mitigation. [1] This bill will provide more oversight over the unwarranted foreclosure proceedings and prevents the usage of robo-signing that is occurring in Colorado.  This bill will not interfere with the legitimate foreclosures that are currently being processed by the banks.  This bill is intended to prevent the foreclosure from taking the homes from those that are being foreclosed upon by those that do not have the legal right to do so.

 One key area addressed in the bill is “robo-signing” — bank officials, lawyers and notaries signing off on documents without really knowing what’s in them. This law will put an emphasis on lenders having all of the proper documents in place and doing things correctly.

Original Documentation History

Prior to 2006 – Colorado law was simple: Foreclosing parties had to provide original documents in order to take someone’s house: notes, deeds of trust, and their assignments. 

HB06-1387 – See SECTION 7. 38-38-101 through SECTION 12. 38-38-106

The result, foreclosure attorneys can now simply attest in writing that their client, a bank or other lender, actually possessed the note or deed of trust to a house they were foreclosing.  For the first time a bank no longer has provide an original deed of trust or other note in order to foreclose.  

After 2006, buying and selling of loans became common practice.  Prior to 2006, banks held on to mortgages. After the housing bubble, banks and other loan originators provided mortgages and then sold the loans.  The buyers of the loans bundled them into securities and sold them to other investors, making it difficult to determine who actually owned the mortgage on an individual home.  In 2006, Colorado had more foreclosures than any other state.  This was the argument used to support the need to “streamline” the process.

Statements from concerned Coloradans:

“The foreclosure referral is typically nothing more than a one to two-page document simply stating the loan is in default, please foreclose. The referral is provided by the servicing company or a subserving company. Servicing companies often provide copies of the note with a single line stating please foreclose in the name of xxx.  Attorneys rarely inspect the original note or make any additional attempt to determine who the proper party is to initiate the foreclosure.”                                                              

 Former Colorado Foreclosure Lawyer

“My loan was sold four times in five months in 2007 and 2008.  My loan was sold to Thornberg from a local bank – into a securitization trust, La Salle Bank – then to Bank of America.  No original note was ever produced. I have never received one piece of clear documentation.  I made $250,000 in payments – I have no accounting of where my money was going.  There was an absolute collision between these bankers.  Bank of America filed the foreclosure – but when I contacted them, they said they didn’t even have my loan number – the servicers changed hands so many times they still don’t even know who owns my loan. They have no proof of who owns my home– my home is now vacant.”                                                          

Foreclosed Homeowner

Colorado foreclosure process- which requires no documentary evidence the proper party is foreclosing - has desecrated the integrity of Colorado's real property title system.  For the sake of all Coloradans, PLEASE take a moment to read the attached proposed bill. We believe sincerely if Colorado is to break free from our current financial stagnation we must first stop the bleeding; secondly: stabilize our real property title system; thirdly: demonstrate to Coloradans and investors alike that Colorado legislators will protect those who will invest here and place their personal resources at risk.                                    

Homeowners, fighting to save their home.

“Widespread securitization of mortgage debts has created uncertainty regarding the proper owner of the evidence of debt.  In many of our clients’ cases there is evidence that another party actually owns the debt.  There are assignments from entities that no longer exist, and assignments from persons who are not authorized to make assignments (“robo-signers”).    At the C.R.C.P. Rule 120 hearing, these issues are routinely ignored by the courts under current law.”                                                   

Foreclosure Defense Attorney

Massachusetts: Southern Essex District Registry of Deeds Audit, July 29^th, 2011

A 2010 independent audit in Massachusetts examined 473 unique mortgage assignments and found that 75% of recorded assignments were invalid. Of those, 27% were fraudulent, 35% robo-signed and 10% violated the Massachusetts Mortgage fraud statute.  The identity of the financial institutions who were the current owners of the mortgages could only be determined for 287 of the 473 (60%)

According to the independent auditor: “The degradation of standards of commerce by which banks originated, sold and securitized these mortgages are so fatally flawed that the institutions, including many pension funds, that purchased these mortgages don’t actually own them because the assignments were never prepared, executed and delivered to them in the normal course of business at the time of the transaction.”

“I am stunned and appalled by the fact that America’s biggest banks have played fast and loose with people’s biggest asset – their homes.  This is disgusting and criminal.  The results of this report are only for (one county), but I can assure you this type of fraud is rampant across the nation.”