BILL SUMMARY for HB09-1276
HOUSE COMMITTEE ON BUSINESS AFFAIRS AND LABOR
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07:08 AM -- House Bill 09-1276
Representative Ferrandino, prime sponsor, presented House Bill 09-1276 concerning a delay in the foreclosure of residential property for eligible borrowers. The bill allows an eligible borrower to defer a foreclosure sale on a residential property for 90 days. The borrower must contact a foreclosure counselor within 20 days after the notice of election and demand is received by the public trustee of the county in which the property is located. A notice of election and demand is the document that starts the foreclosure process once recorded. A foreclosure counselor is defined as a housing counselor employed by an agency approved by the United States Department of Housing and Urban Development, including housing counselors affiliated with the Colorado Foreclosure Hotline and the Hope for Homeowners Hotline. Foreclosure counselors would have immunity and would not be liable to any person for approving or failing to approve a borrower for a foreclosure deferment or for certifying or declining to certify an early termination.
If a loan holder receives notice that a borrower is eligible for a loan deferment, the loan holder must defer the foreclosure for 90 days. The bill identifies criteria that a foreclosure counselor must consider when determining whether a borrower is eligible for a loan deferment. The borrower must make payments during the 90-day deferment period equal to two-thirds of the monthly payment due prior to delinquency, plus one-twelfth of the annual amount due for taxes and insurance.
The Division of Housing in the Department of Local Affairs would provide a description of the foreclosure deferment program to foreclosure counselors. The division would also develop a standard form in English and Spanish that can be posted on the front door of a property that is the subject of a notice of election and demand that provides information regarding how to pursue a mortgage foreclosure deferment. The bill is repealed, effective June 30, 2011.
Representative Ferrandino talked about the foreclosure process and distributed a handout that illustrated the process (Attachment A). He also distributed a letter from the Colorado Bankers Association (Attachment B). Representative Stephens asked about President Obama's plan for foreclosures and how it would affect the bill. Representative Ferrandino explained that foreclosure law is mostly regulated at the state level and that the President's plan would not affect this bill. Representative Ferrandino responded to additional questions from the committee.
07:26 AM -- Carol Snyder, Adams County Public Trustee, representing the Colorado Public Trustees Association, testified on the bill. She distributed a handout that compares the current foreclosure processing time lines for nonagricultural properties with the proposed time lines in House Bill 09-1276 (Attachment C). She talked about the process and said there has been an increase in lenders sitting down and talking to borrowers in default. Ms. Snyder explained that all time lines start running once the Notice of Election and Demand is recorded and under the bill they would begin once the foreclosure packet is received from the lender's attorney. She said this is a concern of the public trustees. Ms. Snyder said they were also concerned over what would happen if a borrower is eligible for the deferment and the attorney did not realize they were until later in the process. She said it is unclear of what happens to the foreclosure deadlines in that case.
Representative Stephens asked whether the bill will increase costs for the trustees. Ms. Snyder explained that they are paid out of fees and are not paid out of county general funds. Representative Ryden asked who was responsible for, and would foreclose on, the borrower of a sub-prime loan that was packaged and sold. Ms. Snyder explained that there is always a lender and the holder of the loan would initiate the foreclosure in that situation. Representative Liston asked what the average cost of attorney fees are for a foreclosure. Ms. Snyder explained that the fees range from a few hundred to a thousand dollars, plus title search fees, and the costs incurred by the trustee. Representative Priola asked whether previous legislation regarding foreclosure have helped the problem or whether they are just prolonging the problem. Ms. Snyder said there are negotiations between the lender and the borrower that result in a withdrawal of the foreclosure and there is no way to know whether that is a result of legislation that was passed or if they just did it on their own.
07:59 AM -- Kathi Williams, Co-Chair of the Colorado Foreclosure Task Force, representing the Colorado Division of Housing, testified in support of the bill. She said there has been a decline in foreclosure in the last year two years. Ms. Williams said many borrowers have been directed to the foreclosure hotline by their lender that is funded by private funds. Ms. Williams said it would be helpful if there could be more time for the lenders to talk with the borrowers. She talked about some concerns with the bill.
08:09 AM -- Ed Kahn, representing the Colorado Center on Law and Policy, testified in support of the bill. He said the bill does not twist the arm of the lender.
08:13 AM -- Aletha Jordon, representing herself and the Association of Community Organizations for Reform Now (ACORN), testified in support of the bill. She thinks the 90 day program would be a good idea and talked about her experience of going through a foreclosure and working with the lender to avoid it. Ms. Jordon talked to her lender and asked for another chance and they gave her two months to correct the situation and forgave her late payments.
08:21 AM -- Jose Vasquez, an attorney from Colorado Legal Services, offered some information on foreclosure. He said Colorado Legal Services is a nonprofit that assists low income borrowers in foreclosure. Mr. Vasquez gave some examples of clients and their situations.
Representative Rice stated that he would like to wait until next week to finish this bill and allow the sponsor to work on amendments. The bill was laid over until February 25 upon adjournment.