Colorado Failing… Foreclosures By Wink, Nod or Text Message

 

Welcome to Colorado…

You won’t believe how badly they FAILED in this state, to change an obviously corrupt law into something with a modicum of common sense.  I had some fun with it, so it should be worth a few laughs… as it infuriates you until you’re ready to scream.

But clearly, the people of Colorado can’t give up.

 

Colorado Failing…

This past year, Colorado’s legislature failed to pass HB-1156, a bill introduced by Rep. Beth McCann (D-Denver), that would have stopped a practice that started six-years ago that allows lawyers representing banks seeking to foreclose to simply file a document stating that their client has the right to foreclose.

Known as the “statement of qualified holder,” it doesn’t require a lawyer to look at anything that shows the bank holds the original mortgage, but even more stunning is that it also provides lawyers with complete absolution from any wrongdoing or penalty should it later be found that the statement signed was wrong.

In light of the crimes we’ve seen committed by foreclosure mills over the last two years, this bill not passing in Colorado is pretty stunning.

Consider David Stern’s law firm, which was sued by investors who admitted publicly that the firm was forging mortgage assignments, faking signatures, and falsifying notarizations all used in the foreclosure process… after he pocketed I don’t know how many tens of millions.  His employees testified that the firm was routinely foreclosing on people without verifying their identities, how much they owed, and who owned their loans.

And who could ever forget the unbelievably tasteless Halloween Party at the New York law firm of Steven J. Baum, where they all dressed up as homeless people after foreclosure.

The firm shuttered its doors in November of 2011, after cutting a deal to pay a wrist-slapping $4 million fine with the U.S. Attorney’s Office in Manhattan for in general robo-signing whatever was needed whenever it was needed.  According to a story in the New York Times, a state court judge in Brooklyn called one particular foreclosure filing from the Baum firm “incredible, outrageous, ludicrous and disingenuous.”

The law in colorado allowing lawyers to foreclose basically on a wink and a nod has only been around since 2006.  If you live in Colorado and pay close attention to what the legislature is doing, it’s perfectly understandable if this one slipped by you, because it was literally slipped into a 67-page bill by the Colorado Public Trustee Association.

In large part, it was written by… wait for it… the most prolific foreclosure attorneys in the state.

 

 

And if that’s not shocking enough… 

 

The Colorado bill was killed by a 13 member legislative committee in a 8-5 vote that went almost along totally partisan lines with all seven Republicans voting against.  Yes, one lone Democrat, Rep. John Soper (D-Thornton) voted with the Republicans.

So, why did Rep. Soper break ranks and vote against the bill?  Well, are you sitting down?  According to the Denver Post, Soper was concerned that having to actually produce documents would slow the foreclosure process and allow homeowners to live RENT FREE.  (Don’t look at me like that, I’m not making it up… that’s what the man said.)

Coincidentally perhaps, Mr. Soper was the former Chairman of the Board at Electrical Federal Credit Union in Denver, but that’s not even the best part.  He said that all the work needed for banks to locate the original loan papers… especially after they’ve been bundled and re-sold countless times… could make it “a real challenge.”

 

“‘What they had done (selling mortgages) put many institutions at a disadvantage and it’s a real challenge to come up with (original documents) and that could extend the time it takes to complete a foreclosure,” Soper said. “This could mean someone stays in the home for a long time without having to pay rent or the mortgage.”

 

The institutions will be at a disadvantage?  Really?  You mean to say that pitted against people that couldn’t even keep up with their mortgage payments, the largest financial institutions in the world will be at a disadvantage because they actually have to produce documents that prove they own a home before they throw someone out of it?

 

How much of a disadvantage, would you say?

 

I mean, are we talking about forgetting your golf shoes and having to play a round of golf in your sneakers, or a Little League team from Punxsutawney, PA playing nine innings against the Boston Red Sox in front of 40,000 at Fenway?

 

Damn it… I’m so tired of this.  Don’t bankers know how ridiculous this stuff sounds?  Finding documents that prove we own the home that we say we’re sure we own presents a “real challenge?”  That’s their “final answer?”

Well, I want to know exactly how much of a challenge it is to come up with this illusive paperwork, because not doing so sure is causing some significant problems in this country.

In the Spring of 1947, Bedouin goat herders, while searching for a lost goat, stumbled upon a cave that we now call the Qumran Cave and by 1956, archaeologists had found 10 additional caves and the Dead Sea Scrolls.  I’m sure that finding those puppies was a “real challenge.”  So, how much of a challenge is finding something that says you own my loan?

 

 

Putting things into perspective…

 

The world’s largest commercial aircraft, Boeing’s 777, is the first fly-by-wire aircraft, it has the largest turbofan engines of any aircraft, six wheels on each main landing gear, it can carry 550 passengers more than half-way around the globe without refueling or requiring a pilot, and to build it, Boeing had to spend $1.5 billion to double the size of its factory in Everett, Washington.  They can build you one from start to finish, including 20 days of flight testing… in 83 days.

 

In Colorado, it takes about 125 days to foreclose.  According to USA Today

 

“In New York, foreclosure lawyers now must affirm that they reviewed documents and asked lenders to verify their accuracy, too. Since that rule took hold last fall, foreclosure filings have dropped to about 750 a month from 3,500, says Paul Lewis, chief of staff to the state’s chief administrative judge.”

They say foreclosing in New York or New Jersey now takes about 900 days.  I want to know how long it takes a bank to come up with papers showing the bank owns the damn home, is that really so much to ask?  Because, I’m sorry, but I’m having a hard time wrapping my brain around why it could possibly take roughly 10 times longer than it takes to build a Boeing 777?  I’m not trying to be difficult about this, but surely people in financial institutions can understand why homeowners are having trouble understanding what’s going on, right?

 

 

Scary banking bedtime stories…

 

The legislative committee hearing that debated HB-1156, went on for five hours, and most of the testimony was in support of the bill’s passage.  But, in an entirely predictable move, the Colorado Bankers Association showed up to deliver the financial industry’s favorite scary bedtime story: Dare to change anything and there will never be loans in this state again… then where will you be?  (Insert evil laugh – BWHAHAHAHA.)

I’m paraphrasing, of course, what they really said was that, “Requiring banks to prove they are the right party to foreclose on a property will ultimately affect homeowners trying to get a loan.

I’ve seen this in real life.  I was involved in promoting a bill in Arizona a year or so ago, sponsored by Sen. Michelle Reagan, and I watched it go through the state legislature’s Senate Banking Committee.  One by one the banking industry’s representatives, including the guy who always shows up for MERS, William Hultman, came to the podium to parrot the industry mantra… “don’t do anything or no more loans for you.”

Rep. Larry Liston (R-Colorado Springs) bought into the scare tactics hook, line, sinker, rod, reel, boat, trailer and trailer hitch.  Explaining why he voted against the bill, he said in an email…

 

“I was concerned the bill would put a severe cloud over banks’ willingness to open up to the mortgage market, and … banks less willing to lend.  It would cost consumers even more for a mortgage by driving up costs to them.”

 

Okay, so first of all, someone should take a moment and explain to Rep. Liston that banks aren’t doing any lending and it has NOTHING to do with the cost of finding paperwork or how long it takes to foreclose.  Only the government is lending, either through Fannie, Freddie, FHA, VA, or the USDA.  That’s because, among other things, the securitization market is broken because no one trusts the ratings on mortgage-backed securities.

It’s also because interest rates are so low no one could make money or stand to take the risk.  Who besides the federal government would want to lend money for 30 years at 3.34 percent on an asset that will likely drop in value by another 20 percent over the next few years to someone who may lose his or her job?

(Is any of this ringing any bells for you, Larry?  If not, maybe someone reading this would like to send him a link or two to anything I’ve written over the last four years.)

Another Republican, Rep. David Balmer (R-Centennial), who also voted against the bill called it “burdensome regulation,” and had no trouble understanding the connection between the finding of paperwork with mortgage costs.

 

“Lenders are set up here consistent with Colorado law.  If they have to keep a great deal of paper records that they don’t have to keep accessible, then have to pull them out and make it accessible, that just drives up the cost of mortgages for everyone.”

 

Okay, I can’t be sure, but I think my mortgage cost me about $9,000 in commissions and fees.  So, how much more would it have cost if the bank had to come up with paperwork that shows they own it before foreclosing?  I’m not asking for exact figures, and I won’t hold anyone to it… just ballpark it for me.  I might be okay with paying the difference.

I’ve had my account at Union Bank of California for something like 10 years, and I can’t cash a check for $5 without two forms of identification, my signature and a fingerprint.  To buy my last car took like 45 minutes sitting in front of the finance manager signing and initialing at least half the time.  And signing my mortgage documents took so long that, as I recall, I had to use the rest room twice.

Look, I’m no mortgage expert, but help me here… where does the paper all go that it’s so damn hard to find?  And please… wherever that is… stop putting it there.

And I can’t help but ask the obvious question: If it takes that long to find it, what is it that they’re looking at that makes them so sure they own it?  Whatever that is, why not bring that in when you have to foreclose?

According to LPS Applied Analytics, as reported by The New York Times in June of 2011, a company that collects data on 40 million mortgage loans, in New York state, thanks to the new rules imposed last fall, it will take lenders more than 62 years at their current pace to clear pipelines of homes that are today seriously delinquent or already in the foreclosure process.

And last year, when there were only 2.1 million mortgages seriously delinquent or in foreclosure, LPS said it would take more than eight years to clear the inventory.  Today, there are 3.3 million mortgages in foreclosure or seriously delinquent… or 5.3 million if you account for those over 30 days delinquent.

That same article in the Times reports that in Colorado it will take only two years to clear the inventory.  So, it seems like adding a little bit of time to that would still have Colorado way under the rest of the nation, no?

Colorado’s legislators who voted against the bill because they said they’re tired of laws reforming the state’s foreclosure process.  They say they’ve passed 15 bills to change the foreclosure process since 2005, and apparently that’s too many already.  They say changing things a 16th time isn’t the answer to anything.

But, Rep. Swalm, one of the Republicans voting against the bill, even admitted that it wasn’t totally without merit.  He called the state’s foreclosure process as “a mess.”

 

I don’t live in Colorado, so I have no idea how much of a mess it is, or isn’t.  What I want to know is what in the world was addressed in the 15 prior bills that was more important than a law allowing bank lawyers to foreclose on the basis of a text message?

 

 

Alright, I’m sorry if this sounds out of line, but I can’t help but recall that you Coloradans just legalized grass during the last election.  Is anyone seeing any connection here?  No?  Okay, fine… I’m just saying…

 

Rep. Balmer also explained his voting no on the Colorado bill as follows… “I’ve not been convinced that the scale of the problem is large enough to warrant such a Draconian solution.”

Ahhh… now that does explain a lot.  Now I understand why he’d vote against it.  Hear that, people of Colorado?  Lucy, you’ve got some ‘splainin to do.

Well, I’d prescribe one email a day, maybe one letter mailed each week, along with copies of all applicable reports and articles that are published… and how about one face-to-face every quarter and at least two demonstrations in front of his office 90 days before election day.  That should do it.

If our politicians don’t get it… it’s our fault.  We need to ‘splain it to them.  That’s where our power lies, let’s take it back and start driving this bus.  We’ve got work to do.

Remember, politicians don’t see the light… until they feel the heat.

 

Mandelman out.

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