Wednesday, February 01, 2012

Colorado State Rep Wants Banks To Start Proving Note Ownership Prior To Foreclosure

A years-old practice allowing foreclosure attorneys simply to attest with a signature that a bank has the right to take someone’s home rather than produce the actual mortgage documents is the target of new legislation.

The bill, introduced last week by Rep. Beth McCann, D-Denver, aims to ensure thousands of Colorado homeowners facing foreclosure each year know that whomever is trying to take their house is legally entitled to do so.

The foreclosure process has come into question nationwide because banks and lenders for years have bought, sold and traded mortgages as securities, but rarely recorded those transfers in property records. As a result, homeowners are often left wondering how a bank they’d never done business with could possibly be foreclosing without paperwork proving they had that right.

“To me it’s the integrity of the process we’re trying to protect,” McCann said. “This bill prevents a lawyer from saying a bank can foreclose simply on their say-so. That’s a huge presumption.”

HB12-1156 would also require county judges reviewing foreclosure cases to first certify a foreclosing lender has the right to take the house before ordering its sale at public auction.

Currently, judges near-automatically approve the auctions during a process called a Rule 120 hearing. Their job is only to determine a homeowner is in default and that they’re not currently serving in the military.

Consumers once had the right to challenge a bank’s standing to foreclose, thanks to a 1989 Colorado Supreme Court decision. But that disappeared following 2006 legislation that let lawyers proceed with a foreclosure based only on their signature rather than actual mortgage documents.

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