To update our previous post, Governor Hickenlooper has reinstated five of the ten public trustees who resigned or retired last month after reports by The Denver Post revealed apparent abuses of public funds by certain trustees. The five reappointed trustees include those in El Paso, Jefferson, Larimer, Weld and Douglas Counties. In addition, the Governor appointed new trustees in Adams, Boulder and Pueblo Counties and indicated that he was still searching for new appointees for Arapahoe and Mesa Counties. The public trustees who were not reappointed were the focus of the Denver Post reports. The Governor also indicated that he looked forward to working with the legislature in January on a number of changes to Colorado’s foreclosure laws, including the laws governing Colorado’s public trustees.
As we noted in a previous post, critics of Colorado’s foreclosure process have been pursuing various avenues to reform parts of that process. They have been particularly focused on the “qualified holder” provision of Colorado statutes, which allows the foreclosing lender to state that it is the owner of the deed of trust being foreclosed, without producing the original documents to prove ownership. A bill that would have amended the statute to require documentation died in the Colorado legislature earlier this year. Proponents of the bill then started working on a ballot initiative that, if passed by voters in November’s general election, would have amended the Colorado Constitution to address this issue.
Those proponents recently announced they are not going to continue to pursue the ballot initiative, and will instead return to their original approach of pushing for legislative changes to the foreclosure statute. According to The Denver Post, the campaign director for the Colorado Progressive Coalition, which had been leading the charge, said she believes the group has built the support it needs to pass the change legislatively. A new bill is expected to be introduced in the next legislative session, which will begin in January.
While The Denver Post recently reported that completed foreclosure sales were at a five-year low in May of this year, and an informal survey by this office of various metro and mountain county public trustees confirmed that, based on filings for the first half of 2012, foreclosures are expected to be generally lower this year than in recent years, some signs suggest that lenders may just be gearing up for a new wave of foreclosures. Although the current slow down in foreclosures could reflect an improvement in Colorado’s economy, it could also result from caution by lenders after the recent $25 billion joint state and federal settlement with the nation’s five largest lenders for alleged foreclosure abuses. In addition, loans which were previously spared from foreclosure as a result of modifications may now be in default again. A recent article in The Denver Post noted that the recording of assignments of deeds of trust from mortgage loan servicers to the actual lenders who hold the loans, which recording often precedes the filing of a foreclosure, has more than doubled in the first half of this year compared with last year, and some experts warn that if only half of those recordings become actual foreclosures, “it could approach the worst of the foreclosure crisis that mushroomed in 2007.”
Developers often secure FHA approval for their condominium projects, enabling buyers to obtain FHA loans. Whether or not those approvals remain in place is left to the owners’ association for the project. As investors continue to snap-up condominium units one at a time or in bulk, it is important to review the status of the FHA approval for the project. As highlighted in a recent Denver Post article, the FHA backs nearly one-third of all mortgages in the United States, up from 5% in 2005. The article also reports that nearly two-thirds of Denver metro-area condominium projects have rejected or expired FHA approvals. As the article suggests, this could be the result of many factors, including FHA’s limit on the number of renters in a project. Even for those projects with intact FHA approvals, investors should talk to the association to understand the association’s plans for renewing the registration and assuring that all the FHA requirements (such as the limit on renters) are satisfied. The association’s plans (or lack thereof) with respect to FHA registration could have serious implications for the investor’s ability to rent the condominium units or sell them to consumers.
Photo by Butterbean Man (Flickr)
We are past the half-way point of the 2011 Colorado legislative session, which began in early January and ends in early May. Several hundred bills have been proposed, and many have already been “postponed indefinitely” or voted down in committee or in a legislative chamber. Below are summaries of certain significant bills affecting Colorado real estate law or the commercial real estate industry that continue to be debated as of the date of publication of this post. Given the many bills under consideration, this list is not intended to be a comprehensive overview.
Real Estate Finance – Lenders Must Pursue Collateral First (HB 11-1139). This bill would prohibit consumer loan creditors, credit unions, savings and loan associations, state banks, industrial banks and mortgage lenders from attempting to collect a debt from a borrower personally unless (a) the creditor first attempts to collect the debt from the collateral, and (b) the proceeds from the collateral are insufficient to pay the debt.
Ballot Measures – Constitutional Initiatives and Referenda Require 60% Voter Approval (Senate Concurrent Resolution 11-001). This resolution would put to the voters via referendum in November 2012, a proposed amendment to the Colorado Constitution that would: (a) beginning in 2013, increase the amount of votes needed to pass a ballot measure for a Constitutional amendment from a simple majority to 60%, except as to measures that repeal Constitutional ballot measures passed prior to 2013, (b) require that a certain number of signatures for Constitutional initiatives be obtained from each congressional district in the State, and (c) increase the voting requirement in the legislature to amend or repeal a successful statutory initiative or referendum from a majority to two-thirds for a three year period after passage. The scope of this measure clearly goes beyond real estate. However, it may be of particular concern to the Colorado commercial real estate industry, which has had to defend against various initiatives over the years. This referendum would make future Constitutional initiatives and referenda more difficult to pass, although it would provide greater protection to successful statutory ballot measures. The concurrent resolution to establish this referendum has passed the House with minor modifications to the approved Senate version. It now is back in the Senate for a vote on the modified version. My colleague Bob Fisher provides more information about this resolution in a post below.
Agricultural Land Taxation – Split Assessment for Agricultural Land with Residence (HB 11-1146). This bill would allow tax assessors to divide a parcel for assessment purposes into agricultural land and up to two acres of residential land unless the residence is “integral to agricultural operations.” The phrase “integral to agricultural operations” would be defined by the Colorado property tax administrator.
Property Disclosures – Commercial Properties Must Disclose Energy Data (SB 11-130). This bill would require owners and operators of commercial properties, defined to exclude multifamily properties sold or leased on a unit-by-unit basis, (a) to upload to the Environmental Protection Agency data necessary to generate an energy performance rating, and (b) disclose the building’s energy performance rating (if one is generated by the EPA) to a buyer, tenant, or lender at the time of conveyance and upon request by such parties. The bill would only cover commercial buildings in excess of 50,000 square feet during 2012, but would cover all commercial buildings thereafter.
Also, a bill restricting private transfer fees is expected to be introduced this session but has not been introduced yet. Further information on these and other bills affecting real estate may be obtained by visiting www.statebillinfo.com.
Photo by cliff1066™ (Flickr).