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.

This weekend, the Denver Post included a story regarding certain legal issues related to the rebuilding of the Colorado Springs homes destroyed by wildfires, many of which were located in covenant controlled communities. As noted in the article, many of those communities have architectural review committees, but given the amount of destruction it is not clear how effective the processes that are in place will be to maintain a cohesive neighborhood architecture. While we watch this situation unfold, communities in areas that are prone to wildfires should take this opportunity to revisit their covenants and ask some important questions about their architectural guidelines and covenants in the context of wildfire danger.

— Are the architectural guidelines comprehensive enough?

— If the covenants allow owners to repair and/or rebuild without approval from the architectural review committee so long as it is done in a manner consistent with what was originally built, how does the architectural review committee determine what was there prior to the casualty? The answer is pretty clear when homeowners are simply repainting their house. But, if the house was completely destroyed, making that determination is much more difficult, especially if the architectural review committee does not have a historical file for the property (which would most likely be the case if no major work has been done on the home since the developer originally built it).

— Even if the covenants as drafted adequately address a complete rebuild, is the architectural review committee strong enough – both organizationally and financially – to enforce the covenants? Is a new committee with additional assessments and/or additional powers – or a new entity with the authority to tax, such as a special district, as mentioned in the article – the answer when the entire neighborhood will need an overhaul?

— Do the covenants and/or architectural guidelines include fire suppression measures, such as brush and debris removal and distance between structures and tree plantings?

We will continue to watch as this situation develops in Colorado Springs.

 

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.”

The dramatic rise in the number of foreclosures filed in Colorado during the last five years has led to increased scrutiny of both the foreclosure laws and the actions of Colorado’s public trustees.  As detailed in an April 4 post in this blog, proponents of ballot Initiative 84 had sought to correct perceived problems in the state’s foreclosure laws with an amendment to the Colorado Constitution.  A recent article in The Denver Post indicates that these efforts are being redirected to effect legislative reform instead.  In addition, the resignation on July 10 of nine of the public trustees appointed by Governor Hickenlooper and the retirement of the tenth followed two days after allegations by The Denver Post that some trustees had used public funds to benefit themselves and their employees.  While public trustees for the majority of Colorado’s 64 counties are elected, ten trustees in some of the most populous counties, including Adams, Arapahoe, Boulder, Douglas, El Paso, Jefferson, Larimer, Mesa, Pueblo and Weld Counties, are appointed by the governor.  The appointed trustees operate with greater autonomy and less oversight of how they spend millions of dollars in foreclosure fees collected by their offices than those trustees who are elected and whose budgets and expenditures must be approved by county commissioners.  The governor’s office has indicated that the positions will be filled by mid-August, though Representative Ray Scott, R-Grand Junction, who sponsored legislation passed in May intended to rein in the authority of public trustees, has asked the governor not to fill the positions but to wait for the General Assembly to pass legislation in January to overhaul the foreclosure process and possibly eliminate the office of the public trustee in its entirety. 

Established in 1894 when Colorado’s economy collapsed upon the federal government’s switch to the gold standard from silver, Colorado’s unique public trustee system was designed to provide a fair venue that would protect the interests of both lenders and property owners.  While some have argued that recent changes in the laws have compromised the rights of property owners, others feel that the current process works fine and that calls to eliminate the public trustee’s office entirely would be throwing the baby out with the bath water.  The resigning public trustees are each eligible to re-apply for their posts and several have already indicated their intent to do so, including El Paso County Public Trustee Tom Mowle, whom our office has found to be one of the most knowledgeable trustees with one of the best-run offices.  We will be interested to see the actions that will be taken by the governor and the legislature, and how those actions will help Colorado address an expected new wave of foreclosures, if one comes.