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Foreclosures Old and New Issues


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									Foreclosure Hodge Podge
       Deanne R. Stodden
        Managing Partner
  Castle Meinhold & Stawiarski,
 Title insurance options
 HAMP and HAFA update
 The eviction process and PTAFA
 Amos v. Aspen Alps 123, LLC
Title products
 Title search – least expensive, DOT
  forward, no insurance
 Foreclosure Guarantee – one step up from
  a search, minimal insurance coverage,
  DOT forward
 Foreclosure Commitment – best coverage,
  two owner search, insurance product
Title and the Foreclosure Mailing List
 Attorney reviews title and tax certification
  and looks for addresses for mailing list.
 If attorney has a title commitment,
  attorney will also be looking for title
  problems such as improper vesting, legal
  description errors, etc.
Mortgagee’s Policy vs. Foreclosure
Search or Insurance Product
   A mortgagee’s title policy (if one was purchased)
    insures the lender (and successors) in lien
    position at time of closing of loan.
   If there is a title problem such as a prior,
    unreleased lien or a legal description error, the
    lender can make a title claim under mortgagee’s
   Foreclosure product insures or guarantees if
    addresses provided in documents are on mailing
    list, at end of foreclosure, lender will have clear
    or “marketable” title.
Mortgagee’s Policy
 Lenders don’t generally purchase title
  insurance for second deeds of trust.
 Some problems can be insured over or
  “around” by title company insuring the
 Sometimes mortgagee’s policy title
  company will indemnify the foreclosure
  title company for a defect.
Home Affordable Modification Program
 Effective 2/18/09.
 HAMP applies to loans originated on or
  before January 1, 2009.
 HAMP is a national program to modify first
  mortgage loans to an affordable and
  sustainable monthly payment amount.
   HAMP offers incentives to lenders and servicers to
    modify at risk borrowers who have not yet missed
    payments when servicer determines there is an
    imminent risk of default.
   Loans can only be modified once under HAMP.
   Lender or servicer, after reducing mortgage payments
    to no greater than 38 percent of the borrower’s debt-
    to-income will receive a Treasury Match for further
    reductions in monthly payments on a dollar-for-dollar
    basis, down to a 31 percent debt-to-income ratio.
   Servicers also receive up-front incentives of
    $1,000 for each modification initiated under the
    Program’s guidelines as well as a $1,000
    payment for each year for up to three years for
    each borrower that remains in the Program.
   Lenders on mortgages that enter the Program
    while the borrower is still current but at risk will
    receive a one-time incentive of $1,500.00 and
    servicers will receive $500.00.
 Freddie Mac and Fannie Mae servicers
  must participate.
 Otherwise the program is optional.
 Most servicers have signed up to
  participate (over 130).
 89% of mortgage loans are eligible for
 Important note: Borrowers do not have a
  private right of action if servicer fails to
  comply with HAMP.
Home Affordable Foreclosure
Alternatives (HAFA)
 Effective April 10, 2010.
 Offers short sales and Deeds in Lieu.
 Complements HAMP – only HAMP eligible
 Pre-approval of short sale terms prior to
 Borrowers will be relieved of debt
2MP Program
Second Lien Program
 2MP was introduced along with HAFA.
 Allows for modifications of second
 2nd lien automatically modified if first lien
  is modified through HAMP.
Evictions in Colorado
 Evictions are performed with the property
  is occupied or contains personal property.
 A post-foreclosure lender (who is now the
  owner) can exercise self-help, but may be
  liable for damages.
 The safest route for a lender post-
  foreclosure is to evict.
Evictions in Colorado
 A pre-requisite to filing the action is a
  Demand for Possession being posted in a
  conspicuous place on the property.
 In a situation where there is rent at issue,
  the Demand for Possession must be
  posted at least 3 days prior to an eviction
  action being commenced in court.
Evictions in Colorado
 After Demand for Possession is posted, a
  Complaint is filed with the court. (Can be
  county or district court)
 Complaint and a Summons to appear
  must be either served or posted (after a
  diligent attempt to serve) not less than 5
  and no more than 10 days before the
  court date.
Evictions in Colorado
   If the defendant does not appear at court date
    nor file an answer, a default judgment for
    possession enters.
   If the defendant does appear or files an answer,
    the defendant may stipulate to judgment
    entering in exchange for additional time to
   Defendant may also file an answer and the
    matter will be set for trial.
Evictions in Colorado
   Trials are generally set no more than one week
    from the return date, but sometimes less.
   At trial, the plaintiff must prove he/she/it is
    entitled to possession.
   The defendant must show why the plaintiff is NOT
    entitled to possession.
   Lenders post-foreclosure generally must show
    that they are the owner to demonstrate they are
    entitled to possession.
Evictions in Colorado
   Lender/Plaintiff can show ownership by a
    PT Confirmation Deed or a PT CP and an
    affidavit that redemption periods have
    expired without a valid redemption being
Protecting Tenants at Foreclosure Act
 On May 20, 2009, the Federal Legislature
  passed what is known as Title VII
  Protecting Tenants at Foreclosure Act or
 PTAFA was drafted and enacted in
  response to complaints of tenants in
  properties that had been foreclosed that
  they were being summarily evicted.
   PTAFA applies in the case of any
    foreclosure of “any federally-related
    mortgage loan OR ON ANY DWELLING OR
   PTAFA requires that if a “bona fide” tenant is
    residing in the property as of the “date of such
    notice of foreclosure,” that the party that
    acquired the interest in the property shall take
    title to the property subject to the tenancy and
    therefore, must provide the tenant with a notice
    to vacate at least 90 days before the effective
    date of the notice or, in the event of a written
    lease, must honor the term of the lease or give
    the tenant 90 days, whichever is longer.
   PTAFA defines a “bona fide tenant” as a tenancy
    in which:
       the mortgagor or the child, spouse, parent of the
        mortgagor under the contract (deed of trust) is not the
       the lease or tenancy was the result of an arms-length
        transaction; and
       the lease or tenancy requires the receipt of rent that is
        not substantially less than fair market rent for the
        property or the unit’s rent is reduced or subsidized due
        to a Federal, State or local subsidy.
 The Act was poorly drafted and uses many
  of vague and/or undefined terms.
 This will likely result in increased litigation.
Amos v. Aspen Alps 123, LLC
 Decided by the Colorado Court of Appeals
  in 2010.
 The decision is lengthy and deals the
  foreclosure of a condominium unit in
 The foreclosure was pre-2008 statutory
Amos v. Aspen Alps 123, LLC
 One of two owners, Righetti, died several
  years before the foreclosure, and the
  Estate did not subsequently record any
  documents evidencing the transfer of
  ownership of the deceased.
 Amos, the other co-tenant, was the co-
  personal representative of the Estate,
  along with Righetti’s daughter.
 Amos received notice of the foreclosure
  and the Rule 120 hearing; Righetti’s
  daughter did not receive notice.
Amos v. Aspen Alps 123, LLC
   Neither files a timely notice of intent to redeem,
    although there was evidence which the trial court
    rejected that Amos may have attempted to mail
    such a notice.
   Regardless, a notice of intent to redeem was
    never received by the public trustee.
   Amos tendered the full amount (over $1 million)
    on the 75th day of the owner’s redemption
    period, but the redemption was rejected for
    failure to file the notice of intent to redeem.
Amos v. Aspen Alps 123, LLC
   The sale invited competitive bidding, and several parties bid
    up to $1.86 million.
   At that point, the bidders agreed to form an LLC to acquire
    the property jointly, although the trial court found that two
    of the three parties had no ability to bid further.
   The owners sought to set aside the sale based on the
    failure to notify Righetti’s daughter of the Rule 120 hearing,
    and to allow the redemption as tendered.
   The trial court found in favor of the lender and the LLC
    which received a public trustee’s deed, and awarded
    attorney fees to the LLC under the spurious lien statute
    based on the recording of a notice of lis pendens by the
    owners at the outset of the litigation.
Amos v. Aspen Alps 123, LLC
   The court of appeals rejected the claim to set
    aside the sale for lack of notice, holding that the
    Estate received actual notice of the foreclosure
    and the Rule 120 hearing and was not
   The court approved the trial court’s rejection of
    the tendered redemption, because of the failure
    of the owner to comply with the notice
    requirements in the statute, based in part on the
    lower court’s finding that the notice was probably
    never mailed.
Amos v. Aspen Alps 123, LLC
 However, the Court of Appeals reversed
  the trial court and agreed with the owner
  that unlawful bid rigging occurred.
 Under the Colorado Antitrust Act, C.R.S. §
  6-4-106, “[i]t is illegal for any person to
  contract, combine, or conspire with any
  person to rig any bid, or any aspect of the
  bidding process, in any way related to the
  provision of any commodity or service.”
Amos v. Aspen Alps123, LLC
   The court held that bid-rigging is per se
    illegal and remanded to the trial court for
    determination of the appropriate equitable
    remedy, directing the district court to set
    aside the sale to the LLC, and to either
    allow the individual high bidder to obtain
    title or to require a new sale with the
    attendant rights of redemption.
Amos v. Aspen Alps123, LLC
   The court reversed the trial court’s award
    of attorney fees to the LLC under the
    spurious document statute (based on the
    recording of a notice of lis pendens) and
    reversed the judgment in favor of the LLC
    for slander of title.

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