Foreclosures can end marriages, derail children and basically ruin lives.
If a lender has been wronged, because a buyer has failed to pay, foreclosure may be the only recourse. Considering what’s at stake for a borrower, a lender’s foreclosure process should be almost as meticulous as a criminal proceeding. All benefit of the doubt should go to those who are about to lose a home. If they are in the wrong, prove it.
As we saw during the “robo-signing” scandal, presumption of innocence is seldom granted to homeowners who end up in foreclosure. In 2010, after the robo-signing scandal broke, the public learned of lenders and assignees signing tens of thousands of foreclosure documents without anyone actually reading them and verifying information. Several of the nation’s largest banks were caught backdating paperwork to validate their efforts to foreclose. Press accounts told of banks signing over documents from lenders that no longer exist. An ABC News investigation found one Florida lawyer who had processed 150,000 foreclosures in three years — 130 a day, if she never took a day off. Clearly, she wasn’t reading or validating paperwork.
Stories of scandal and heartbreak, as lenders carelessly mass-produced foreclosures, were common in 2010 and ’11.
In Colorado, state law still facilitates sloppy foreclosures. Former law professor Rob Natelson, who works with Colorado’s Independence Institute, explains that lenders often sell mortgages to assignees. Homebuyers are then required to pay the assignees, not the original lenders. If the homebuyer doesn’t pay, an assignee may foreclose.
Fair enough. But in transfers of loans, things can go wrong. Transfer notices may not get to borrowers. Assignment of deeds, to new holders of debts, may not be executed properly. This is why foreclosures require meticulous attention to detail and validation of claims.
Colorado law, Natelson explains, “allows the assignee to foreclose without producing the assignment papers if his lawyer files a simple statement instead. Very bad law.”
To say the least. It means that a paid advocate — a person hired to defend a position — gets to circumvent the burden of genuine validation, just like that lawyer in Florida.
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“An assignee looking to foreclose should actually have to produce the documents — promissory note, mortgage, assignment, etc. — proving he has the right to do so,” says Natelson, who was the real estate columnist for the former Rocky Mountain News. “That’s simple fairness. It’s also an important protection against mistakes and abuse.”
HB1156 would change things and instill more respect for property rights in Colorado law. Sponsored by two Denver Democrats — Rep. Elizabeth McCann and Sen. Michael Johnson — the bill would require anyone claiming rights as an assignee to fully document their claim.
This is common sense. Yes, lenders have rights. We must respect those rights or no one will make loans. But taking a home, and displacing human beings, is serious business. It is reasonable that our law make foreclosure a process that is so precise as to almost defy suspicion. Please make HB1156 a law. In a civilized society, founded on property rights, buyers who play by the rules should be safe from accidental or sloppy foreclosures by desperate and overwhelmed lenders.
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