Transcript Foreclosures – Old and New Issues

Foreclosure Hodge Podge
Deanne R. Stodden
Managing Partner
Castle Meinhold & Stawiarski,
LLC
Agenda
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
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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
policy.
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
foreclosure.
 Sometimes mortgagee’s policy title
company will indemnify the foreclosure
title company for a defect.

Home Affordable Modification Program
(HAMP)
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.
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HAMP
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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 debtto-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.
HAMP
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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.
HAMP
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
HAMP.
 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
borrowers.
 Pre-approval of short sale terms prior to
listing.
 Borrowers will be relieved of debt
obligation.

2MP Program
Second Lien Program
2MP was introduced along with HAFA.
 Allows for modifications of second
mortgages.
 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 postforeclosure 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.
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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.
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Evictions in Colorado
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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
vacate.
Defendant may also file an answer and the
matter will be set for trial.
Evictions in Colorado
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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
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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
made.
Protecting Tenants at Foreclosure Act
(PTAFA)
On May 20, 2009, the Federal Legislature
passed what is known as Title VII
Protecting Tenants at Foreclosure Act or
“PTAFA.”
 PTAFA was drafted and enacted in
response to complaints of tenants in
properties that had been foreclosed that
they were being summarily evicted.
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PTAFA
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PTAFA applies in the case of any
foreclosure of “any federally-related
mortgage loan OR ON ANY DWELLING OR
RESIDENTIAL REAL PROPERTY AFTER THE
DATE OF ENACTMENT.”
PTAFA
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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
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PTAFA defines a “bona fide tenant” as a tenancy
in which:
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the mortgagor or the child, spouse, parent of the
mortgagor under the contract (deed of trust) is not the
tenant;
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.
PTAFA
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
Aspen.
 The foreclosure was pre-2008 statutory
changes.

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 copersonal 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.
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Amos v. Aspen Alps 123, LLC
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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
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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
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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 prejudiced.
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
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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
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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.