Starting Aug. 1 and continuing through June 30, 2011, Colorado homeowners facing the foreclosure process could be eligible for a 90-day deferment, according to House Bill 09-1276. Gov Bill Ritter signed the bill into law June 2.Foreclosure continues to affect the Falcon/Peyton area, as defined by the 80831 zip code. According to the El Paso County Public Trustee Web site, between Jan. 1 and May 31, the number of foreclosures (145) is just three less than the number of foreclosures in the same period last year.James Flynn, a Colorado Springs attorney, said HB 09-1276 allows homeowners “some time to get a meaningful negotiation going” with their lender.Flynn said loans can be modified several ways, including changing the interest rate, changing the amortization rate or adding missed payments to the end of the loan.”Most lenders would rather do a work-out than a foreclosure, if you can get the communication going,” he said.Getting the communication going has been a problem since the foreclosure crisis started.”At the mass-lender level, foreclosure files are shoved off to employees who have no authority to make decisions,” Flynn said.HB 09-1276 requires that lenders notify homeowners early in the foreclosure process that they can apply for a 90-day deferment through a foreclosure counselor, who often has an inside edge in reaching decision makers at lending institutions.To qualify for a deferment, within 20 days of being notified, the homeowner must contact a foreclosure counselor employed by an agency approved by the U.S. Department of Housing and Urban Development, such as Colorado Foreclosure Hotline.To be eligible for a deferment, the original principal amount must be less than $500,000. The borrower must also occupy the home as a primary residence and intend to continue to do so.Homeowners are not eligible for the deferment if they provided false information to get the loan, trashed the property, used the property for illegal purposes, filed bankruptcy, received a citation for a code violation or have already received a deferment or have been discharged from a Chapter 13 bankruptcy with a modified loan agreement within the previous 24 months.Within 30 days of the homeowner contacting the counselor, the counselor decides if the borrower qualifies for a deferment. As stated in the bill, the determination of qualification is based on the homeowner’s household expenses, gross monthly income, the type of loan and the reasonable likelihood that the lender and homeowner can reach an agreement that will avoid foreclosure.If the homeowner qualifies for the deferment, the foreclosure process is suspended until the terms of the loan are renegotiated or the deferment expires.During the deferment, the borrower must pay 66 percent of the regular monthly payment.The bill does not require that the lender must reach an agreement with the homeowner to modify the terms of the loan.The bill does allow the lender to request early termination of the deferment if the borrower files for bankruptcy, abandons the property, fails to make the 66 percent payments or another lender files for foreclosure.Flynn said there are other ways homeowners can fend off foreclosure, such as the mandatory federal program that gives incentives to loan servicers and lenders who received bailout money to modify loans made by Fannie Mae and Freddie Mac.He also pointed out Colorado statute (38-38-102.5) – passed in 2008, which mandates that lenders send a notice to the homeowner 30 days before filing for foreclosure.The notice must include the Colorado Foreclosure Hotline telephone number and the name and telephone number of a person who has authority to act on behalf of the lender who is about to foreclose, Flynn said.If a lender did not provide this notification, the magistrate at the Rule 120 hearing (the hearing at which the property is authorized to be sold) may require that the lender restart the foreclosure proceeding properly, he said.Joe Morgan, a Black Forest resident who has held free workshops to educate homeowners about Colorado’s foreclosure process, said, “Homeowners should take advantage of everything that’s available to them and not give up.”Homeowners should keep in mind that they have rights and they should attend the Rule 120 hearing if they believe they have the financial resources to save the property, Morgan said.Colorado law provides an extra incentive for homeowners to fight hard to save their homes: the deficiency judgment.When a lender takes ownership of the property as a result of the foreclosure process and then sells it for less than the loan amount, the lender can go to court and get a deficiency judgment, Morgan said.”For example, a lender who’s owed $200,000 but only gets $150,000 from the sale of the property may obtain a $50,000 deficiency judgment and pursue the former homeowner for the deficiency,” he said.”Many lenders sell deficiency judgments to collection agencies. Those agencies usually wait years for the former homeowner to get back on his or her feet before they attempt to collect. Although some states forbid deficiency judgments, they are legal in Colorado.”To their detriment, homeowners [in foreclosure] typically ignore a lot of the mail they receive, and they may ignore a deficiency judgment notice, too, or not receive it at all if they haven’t left a forwarding address with the lender.”There are ways for lenders and collection agencies to track down former homeowners. Usually learning of the deficiency judgment is a big surprise.”Morgan said if a homeowner in foreclosure follows up with a bankruptcy, deficiency judgments can be discharged.Helpful resources:Colorado Foreclosure Hotline: www.coloradoforeclosurehotline.org 877-601-HOPE.www.makinghomeaffordable.gov: Provides information on mandatory modifications to Fannie Mae and Freddie Mac loans; the site includes a questionnaire to help borrowers determine if they qualify for this program.www.leg.state.co.us to download a copy of HB 09-1276www.elpasopublictrustee.com for information about El Paso County’s public trustee
