Foreclosure reform: Initiative 84 aims to put fix rejected by House committee in constitution
When House Bill 1156 was killed last month before even making it to the full chamber, its supporters started immediately on a stronger effort to add transparency to the state's foreclosure processes. But the tactics have changed: Instead of creating another bill, they created a constitutional amendment targeted at requiring lenders to prove ownership of property before foreclosing on it. The initiative has passed its first roadblock.
In 2006, Colorado lawmakers legalized the practice of lawyers granting their approval during a foreclosure; the process previously required additional paperwork. HB 1156, which also sought to add to the checks and balances of the foreclosure process, died in committee when legislators rejected it as yet another law aimed at foreclosure reform. Criticism even implied that its host organization, the Colorado Progressive Coalition, was partially responsible for the rejection, suggesting another supporter with a shorter history of proposals might have found greater favor.
But 1156 marked the first time the CPC ran an attempt at changing foreclosure legislation. The bill's demise disappointed COC's organizers, but so did accusations that its identity as the host played a role.
"They said they kept seeing these foreclosure bills coming in front of the legislature and they needed to see someone else running them," says Corrine Fowler, the CPC's economic justice director. "We're not just running legislature rampantly. We work on legislation that our community brings to us."
So what was the group's reaction? "Honestly, it's this initiative," Fowler says. "If our legislators aren't going to do their job, we're going to have the people vote on this."
Initiative 84 became a constitutional matter early in discussions on how to approach reform a different way, in large part because its creators see it as a natural addition to the state constitution's existing references to due process.
"What happened at that committee meeting just told me that I'm excited to take this to the people," Fowler says. "This restores due process under the law and enforces property rights while placing them in our constitution, where these issues should be. Saying that a bank or any other entity should prove they have a right to your property before they take it away is not an irrational issue."
Written by Debra Fortenberry and Stephen Brunette, both Colorado Springs attorneys, Initiative 84 would make it necessary for any lender to prove the right of foreclosure before doing so. The bill passed its first review and comment hearing on Friday, and its creators have since made changes to its original language.
Although the suggestions are not mandatory, they are provided with the intention of guaranteeing an initiative follows the correct path to becoming an amendment. From here, the bill will go in front of the title review board on April 18, when representatives will decide on final phrasing before the initiative moves forward. The next stage is costly: Supporters must collect at least 87,000 signatures in order to get it there. Efforts to do so are estimated to cost $200,000, says Fowler, and the group would have ninety days to accomplish its goal.
"The reality of collecting all of those on a volunteer basis is only is, well, not a reality," Fowler says. Instead the group will split its effort between volunteer efforts and paid efforts, which "can cost between $1.50 and $2.50" per signature.
Fortenberry began fielding hundreds of phone calls in late 2008 from residents confused and concerned about their upcoming foreclosures. People who reached out alleged misrepresentation and told her they could not understand the process. By the same time in 2009, Fortenberry and a small group of area lawyers had created an addition to the El Paso County Bar Association, a foreclosure assistance subcommittee that meets every month to discuss these issues.
Fortenberry attributes the core of the confusion to the qualified holder certification, the right of an attorney to sign in favor of foreclosure. The signature requires no proof, "and that's where this gap opens," Brunette says. "There's this disconnect between the institutions and the people and the proof." Earlier this year, Fortenberry and Brunette organized their efforts with state representative Beth McCann, who also sponsored House Bill 1156 before it was rejected.
By presenting the effort as an amendment to the Colorado constitution, supporters are avoiding the drawbacks of a legislative statute, which if passed would require the amendment of several other laws and could be changed again in following years. The hope is that if this initiative is eventually approved, it will stick. Prior to 2006, the foreclosure process required more certification than it does now, with ownership records provided by lenders prior to any final decision.
Fowler hopes that by reconstructing the idea, organizers can create a lasting standard of transparency throughout the state. "Special interests like the Colorado Bankers Association won't be able come back and change it in future years," Fowler says. "This is going to affect the bottom line of the lawyers and the bankers, and we know that and don't take this lightly. We believe that the foreclosure crisis is the biggest issue our national economy is facing."
Here's the initiative's amendments and current wording:
Foreclosure Fraud Prevention Initiative SOS Filed Docs
More from our Politics archive: "Colorado Progressive Coalition and Occupy Denver launch foreclosure action week."