The Colorado Housing Stabilization and Mortgage Accountability Act
policy choices we make now regarding loan servicing and loan
modifications have the potential to influence both the duration and the
severity of the economic crisis." -- Center For Responsible lending (2)
Bill aims to give homeowners the right to ask who’s taking their house --Denver Post
All Colorado Homeowners deserve fair and honest treatment in the foreclosure process, and a fair opportunity to save their homes when an alternative to foreclosure is possible. HB 1249, "The Colorado Housing Stabilization and Mortgage Accountability Act," would put in place measures to promote transparency and fairness in the foreclosure and loan modification process for all Colorado mortgage servicers. It is time for the
Colorado Legislature to take action to address the significant issues
affecting the economic well-being of Colorado families through
meaningful foreclosure reform. For a PDF of the bill click here. For Press Click Here.
What this bill will do?
The latest data shows that in 2010, lenders filed a record 3.8 million foreclosures and that 5.7 million homeowners were at imminent risk of losing their homes (1). It is projected that between 10 and 13 million foreclosures will have occurred by the time this crisis subsides.
Modeling after two key bills championed by the California State Attorney General, the Campaign to End Unjust Foreclosure supports the following reforms to Colorado’s broken foreclosure system:
Restrict Dual Tracking: Under current law, borrowers can be processed for loan modifications and foreclosures simultaneously, resulting in many borrowers who are negotiating for a loan modification wrongfully losing their homes. This bill will ensure that borrowers who submit a completed loan modification application will get a “yes or no” decision from their servicers, with an explanation, before they commence the foreclosure process.
Require Proper and Accurate Foreclosure Documentation: Requires servicers to review reliable evidence to substantiate the borrowers’ default and their right to foreclose. In addition, all recorded foreclosure documents must be properly reviewed and verified for accuracy.
Giver Borrowers an Accountable Point of Contact: Requires servicers to give borrowers who are potentially eligible for a loan modification an accountable point of contact that will provide clear, accurate information to borrowers and coordinate all documents associated with loan modifications.
Provide Strong but Fair Accountability: To ensure that servicers have a strong incentives to comply with these provisions, the bill provides that borrowers may bring legal actions to courts, but only for material violations of the law. Judges can provide only injunctive relief, requiring a servicers to stop the foreclosure sale and correct any previous violations.
Why is this bill needed?
According to a recent Report from the National Consumer Law Center, servicers are:
- Sending homes to foreclosure sale while homeowners are still in the process of trying to modify their loans.
- Denying loan modification to millions of homeowners through a process of calculated chaos
- Losing documents en masse
- Failing to follow promise time frames and failing to notify homeowners of reasons for servicing actions
- Giving invalid or blatantly false reasons for denials
- Providing ineffective review of decisions
- Foreclosing while reviewing for modification or while the borrower was complying with trial modification
Restore Integrity to the Foreclosure Process:
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 created a loophole in foreclosure statute. The result, foreclosure attorneys can now simply attest in writing that their client, a bank or other lender, actually possesses the note or deed of trust to a house they are foreclosing. For the first time a bank no longer has to provide an original deed of trust or other note in order to foreclose See SECTION 7. 38-38-101 through SECTION 12. 38-38-106
Prior to 2006, banks held on to mortgages. After 2006, buying and selling of loans became common practice. When the housing bubble burst, 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 owns 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 and push HB06-1387.
Stabilize our Housing Market: In CO, 20% of all homes are underwater and we continue to be in the top 10 for foreclosure sales nationally. Pueblo, Adams, Arapahoe, Mesa and Park counties continues to see increases. It is estimated that homes in foreclosure experience a 22% decline in value.3 Home values are based on sales of surrounding homes – so the foreclosure sales prices are directly impacting surrounding home values. This loss of wealth is the number one drag on our economy – our families no longer have retirement savings, funds to pay for tuition for their children, capitol to hold on to or start businesses, or savings to pay medical bills. Foreclosure prevention alternatives, like loan modifications, help families stay in their homes and return more money to investors. Foreclosure should be the last resort – we need to help the majority of people stay in their homes to stave off all the damaging effects that foreclosures have on our communities.
2 Center for Responsible Lending, Lost Ground, 2011: Disparities in Mortgage Lending and Foreclosures, (2011).
3 The Value of Foreclosed Property, Anthony Pennington-Cross, Marquette University.