March 11, 2013
by Cynthia Lowery-Graber
The Castle Law Group, LLC – USFN Member (Colorado, Wyoming)
The 2013 Colorado legislative session is underway. There are two bills to watch closely that impact default servicers and the Colorado foreclosure process.
First, HB13-1017 requires a servicer who accepts the transfer of a loan to process and respond to any outstanding loan modification request that was made prior to the transfer. In addition, the bill compels the new servicer to accept and honor any trial and/or permanent loan modification agreements entered into by the prior servicer or accepted by the borrower prior to the servicing transfer. HB13-1017 has passed in both the Colorado House of Representatives and the Senate.
The second bill is the much anticipated “Foreclosure Sale and Loan Modification Document Requirements” legislation. HB13-1249 was introduced on Monday, March 4, 2013 after being granted late bill status. The legislation portends significant impacts upon foreclosure practices in Colorado.
Currently, Colorado statute permits certain “qualified holders” to commence a foreclosure with copies of the original loan documents, in addition to a certification stating that the holder of the note is a “qualified holder” under Colorado statute. The ability of “qualified holders” to submit the foreclosure action with a copy of the note and a certification may be diminished by this new legislation. The proposed legislation requires that the original note or copies of the note include indorsements or assignments. Contrary to current statute or procedure, this new proposed requirement suggests that a full chain of indorsements or assignments may now be required in Colorado. Also, the certification of the qualified holder would have to be signed under penalty of perjury.
Further, the proposed legislation attempts to oversee the loss mitigation process by requiring loan servicers to provide a “single point of contact” to any borrower who requests a foreclosure prevention alternative. The proposed law requires that the “single point of contact” remain assigned to the borrower until all options have been exhausted. The bill also prohibits dual tracking by precluding the initiation of a foreclosure action where a complete application has been submitted for a loan modification or, if the foreclosure was already commenced, that it be held in abeyance until a written denial is provided to the borrower.
Finally, the proposed legislation supplements the motion for order authorizing sale (Rule 120) process to require that the moving party prove that it has standing to bring the foreclosure and that it is the holder of the evidence of debt. The bill prevents the holder from filing a new motion for at least six months following a denial of the order authorizing sale, and only if the holder obtains new or different evidence in support of its motion. Lastly, the bill precludes the moving party from charging attorneys’ fees and costs in a subsequent judicial foreclosure should it be unsuccessful in obtaining a court order pursuant to Rule 120, and grants the prevailing party attorneys’ fees and costs in connection with any successful action for injunctive relief.
At this juncture, the viability of HB13-1249 is unknown. The banking and lending industries are remaining vigilant as this legislation develops.
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