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02 Feb 2012

Good News for Colorado Springs Foreclosure Victims

If Democratic state lawmakers are successful, the simple signature of a bank-employed attorney will no longer be enough to push through foreclosures in Colorado. 

A new bill targets a years-long practice in Colorado that unfairly skews the benefit toward large financial institutions. Under the current system, attorneys paid by banks are allowed to rubber stamp the bank's right to pull a home out from underneath its owner - without having the proper mortgage documents to back it up. In the last few years, this has meant a windfall for bankers and led to a crisis whereby people were forcibly removed from their homes by a lender that may not have had the right to do so.


The problem started in 2006, with a change to state law that seemed to go largely unnoticed. It allowed banks to take a person's home with scant evidence, aside from the signature of the bank's attorney.

While the entire U.S. banking industry has come under scrutiny for less-than-savory practices throughout the housing bubble burst, our Colorado Springs foeclosure attorneys recognize that our state has not done nearly enough to protect homeowners.

The Denver Post reports that many banks are being scrutinized because for decades, lenders traded, bought and sold mortgages as securities. However, those deals were rarely recorded in property records. Then, when homeowners began getting notices of foreclosure, the paperwork originated from a bank they had never done business with. For many, the question of who actually owned the rights to the home loomed large. As Colorado homeowners tried to sort through a convoluted paper trail, banks easily claimed their own rights with the stroke of a pen.

Rep. Beth McCann of Denver, who is sponsoring the bill, told the Post that the integrity of the foreclosure process is at stake.

"This bill prevents a lawyer from saying a bank can foreclose simply on their say-so," she told the paper. "That's a huge presumption."

Indeed.

Another aspect of the foreclosure process that HB12-115 addresses is how judges review individual cases. Right now, judges almost always approve auctions. The only thing a judge really analyzes in a case is whether the homeowner hasn't paid and whether he or she is in the military. They don't look at whether the bank or lender requesting the auction is actually authorized to do so.

It wasn't always this way. A 1989 decision by the state's supreme court gave Colorado homeowners the right to challenge a bank's standing in a foreclosure proceeding. The 2006 legislation, however, overruled that right.

Stephen H. Swift

Managing Attorney
Law Office of Stephen H. Swift, P.C.

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