A group of Boulder activists has joined a statewide effort to rein in bank foreclosure shenanigans blamed for the national housing market crash over the past several years.
Corrine Fowler, economic justice campaign director for the Colorado Progressive Coalition, is a leader in the movement to get enough petition signatures to put Initiative 84 up for a vote this fall in Colorado. The measure would require banks to actually prove they hold mortgages before foreclosing on properties, ending a provision of Colorado law that allows banks to foreclose with what initiative proponents say is the mere formality of an attorney’s signed statement — instead of a deed of trust.
The Rocky Mountain Peace and Justice Center (RMPJC) in Boulder is one of six signature-gathering hubs for the measure around the state, and they’re looking not just for more people to sign petitions, but to collect enough signatures before the Aug. 6 deadline to get it on the ballot.
“The same standards that apply to regular people should apply to banks,” says Carolyn Bninski of the RMPJC, who, along with Mary Beth Kern, is coordinating the local effort.
There have been scores of horror stories in recent years of illegitimate foreclosures in which banks were unable — or unwilling — to produce proper paperwork for a mortgage, in many cases because the loans had been sold and resold to speculators and other investors in what is called the “secondary market.”
In November 2010, for instance, Boulder Weekly reported that one Colorado resident, Bruce McDonald of Crestone, had filed suit over claims that the bank foreclosing on his property was not actually the holder of the loan because it had been transferred from one bank to another and sold to Freddie Mac.
Similarly, in spring 2011, Jewl Petteway, owner of Sensorielle Spa in Boulder, claimed that JPMorgan Chase not only didn’t hold proper title to her Nederland home, but attempted to foreclose on her property in spite of the fact that she was undergoing a loan modification.
And Fowler shares the story of an upper-middle class family’s house in Colorado Springs that underwent fore closure despite the fact that the family had not missed a payment. It cost the family $40,000 in legal costs to get their home back, and they are the fortunate ones, Fowler notes.
“They were lucky to have the means and resources to go through this,” she says. “But what about the family who doesn’t, who lives paycheck to paycheck?” The scores of cases in which banks didn’t produce necessary paperwork, or were involved in robo-signing and other fraudulent foreclosure practices, have been one of several key issues providing fuel to the Occupy movement in Boulder and nationally. The basic princi-ple is that the bank foreclosing on the loan should demonstrate that it is actually the aggrieved party, the holder of the promissory note or deed of trust.But in 2006, Colorado lawmakers passed legislation that Fowler says was pitched as an administrative “cleanup” to “streamline” the process by allowing a bank attorney to simply attest in writing that the bank has the right to foreclose — instead of requiring proof.
Initiative 84 would close that loophole by prohibiting banks from foreclosing on properties unless they file “competent evidence of its right to enforce a valid security interest” with a public trustee. In other words, the ballot measure would change state law to require banks to present a deed of trust, for example, to the county clerk and recorder before foreclosure proceedings could begin.
Fowler told Boulder Weekly that as much as 80 percent of foreclosures have been found to be fraudulent in some states, and that the shifty paperwork pushing makes it hard to track chains of title.
State Rep. Beth McCann (D-Denver) tried to rectify the situation this spring with HB 1156, which would have reversed the lax 2006 standards, but despite hours of testimony from homeowners who claimed that they had been wronged by banks, her bill died in its first hearing, before the House Economic and Business Development Committee.
So Fowler, joined by homeowners’ rights attorneys Stephen Brunette and Debra Fortenberry of Colorado Springs, launched the campaign to restore “fundamental rights of due process,” she says.
The only opposition to the measure thus far has come from the Colorado Bankers Association, which has claimed that the initiative will create a credit crisis in the state.
Don Childears, president and CEO of that group, told Boulder Weekly that if Initiative 84 passes, its language would severely limit banks’ ability to lend, which would have serious trickle-down effects on the economy, the construction industry, jobs, tax collection and even existing mortgage holders.
“We think it’s unfair to the 98 percent who pay their loans and will have to pay for this new system,” Childears says.
He explains that the secondary market relies on the ability to transfer and sell loans freely, or without assignment — kind of like currency, or leaving the “payment to” line on a check blank. Initiative 84 would require those assignments to be recorded, which precludes such loans from being sold in the secondary market.
Childears also says there has been only one documented court case in recent years of a bank improperly foreclosing on a property in Colorado, which has been seeing 20,000 to 30,000 foreclosures a year of late.
He lays the majority of the blame for the housing market crash at the feet of unethical non-bank lenders, which don’t have to comply with the same standards as banks. Childears says his association blew the whistle on unethical mortgage brokers about a decade ago, and he points out that while non-bank lenders account for about 42 percent of mortgage loans in Colorado, they account for 82 percent of the foreclosures.
He also maintains that Colorado’s current system is superior to those in other states. Colorado is not a “judicial” state, in which foreclosures get bogged down in a court system, lengthening the time a house stays vacant and hurting the market and the economy, Childears says. It is also not a “private trustee” state, he explains, in which the lender designates who holds the deed of trust and handles the foreclosure. In Colorado’s “public trustee” system, a theoretically objective third party, the clerk and recorder, is required by law to protect both the buyer and lender, he says.
The disputed attorney’s certification, according to Childears, is simply a way to attest that the copy (often digital) of the promissory note or deed of trust pro vided to the clerk and recorder is true and accurate.
“There’s not a problem now,” he says, adding that Initiative 84 only adds “duplicative red tape” and “will not stop a single foreclosure.”
His organization plans a campaign to fight the initiative, but first, it has filed a challenge with the state Supreme Court claiming that the measure is ambiguous and would affect both foreclosures and lending, thus violating the state’s single-subject rule for ballot initiatives.
But initiative proponents characterize the Colorado Bankers Association’s allegations as scare tactics.
“Initiative 84 does not create onerous, new, or unique responsibilities for lenders,” Fowler wrote in a prepared statement responding to the CBA’s concerns. “Colorado provides no place in our foreclosure system for a borrower to raise a defense to fraud. As it stands now, individual homeowners must challenge lender misconduct in a separate court case. This can take years, and cost tens of thousands of dollars. In an era where millions of loans are transferred, multiple times, we must make sure that our property records are secure.”
“We do not need the secondary market to have a stable housing market,” Fowler told Boulder Weekly. “And actually, it was the secondary market that caused the crash.”
To get involved with the local proponents, contact Bninski at 303-444-6981, ext. 2, or at email@example.com. More information about the Colorado Bankers Association can be found at www.coloradobankers.org.