With foreclosures on the rise, it is no wonder that Colorado’s unique public trustee approach to the bank/borrower relationship finds itself in the limelight. The CEO of RealtyTrac was quoted in a recent USA Today article suggesting that foreclosure-related sales will increase this year “as lenders start to more aggressively dispose of distressed assets held up by the mortgage servicing gridlock over the past 18 months.”
While many believe that Colorado’s foreclosure statutes afford a reasonably inexpensive and prompt remedy for lenders while providing property owners a fair chance to protect their interests, others strongly disagree. As a recent article in the Denver Post put it, “No other state allows for a foreclosure without the lender first proving it is the right entity to do so;” and those in agreement have been working on legislation to tighten Colorado’s foreclosure process.
Rep. Chris Holbert, R-Parker, however, sees these efforts as adding more unnecessary regulations to an already overregulated industry. Another recent Denver Post article quoted Rep. Holbert as saying, “Since 2005, the legislature has run and enacted 15 different bills to affect and change the foreclosure process in Colorado. Now is a good time to leave it alone and stop changing things. The process we have in place works fine. Changing things for the 16th time isn’t the right solution.”
At the heart of the debate is which specific documents a foreclosing lender must provide to the public trustee, especially when that lender’s interest is based on an assignment of the debt. Currently, Colorado law allows lenders to foreclose on real property even if their interest is based on an assignment from the original lender and that assignment is not produced. Instead, all that is necessary is a statement signed by the lender, or its attorney, stating that the lender’s interest is valid. House Bill 1156, which died in committee last month, sought to tighten the rules by, among other things, striking that option for foreclosing parties.
But advocates of the bill are trying again and going further this time with a ballot proposal that would require all documents necessary to institute a foreclosure, including any endorsements, assignments, and transfers of the debt, be recorded in the real property records prior to commencing a foreclosure. If proponents of the initiative are successful, an amendment to the Colorado Constitution will be put before voters in November.
Photo by Taber Andrew Bain (Flickr)