SD-10: Diane Whitley on Colorado's growing foreclosure crisis

Diane Whitley is going to take on the Republican hegemony in eastern El Paso County. Her first target is the SD-10 seat held by Bill Cadman, and the foreclosure crisis has gotten her attention:

The other day I read an article which quoted RealtyTrac, saying that Colorado continued to be in the top ten states in the nation for mortgage foreclosures. It stated that as of November 2007, one in 196 mortgages were in foreclosure nationwide. This is especially troubling to me as my son, Shaun, bought a house several years ago with an adjustable rate mortgage. Seeing how many of these mortgages have ended in foreclosure—I’m naturally concerned. So I typed “Foreclosures- El Paso County Colorado” into the Google search engine; and a ForeclosureStore.com page popped up which asked for a zip code of the area to be searched. I didn’t know Shaun’s zip off the top of my head so I typed in 80808 (Zip code for Calhan, Ellicott area). There were 843 foreclosures listed within a 25 mile radius of Ellicott! All of this would be within the Senate District 10 area. This is a mostly rural area… there aren’t that many houses out here to begin with!

In 2002, when the Republicans were in control of the Governorship, House and Senate, Sen. Bob Hagedorn (D) introduced a bill (SB02-073) entitled “A Bill for an Act Concerning Protection of CO Homeowners against Abusive Home Loan Practices,” in the CO Senate. The bill was passed in the Senate on the third reading and sent to the House Information & Technology Committee- where Mr. Bill Cadman, our recently appointed senator and my opponent, was Vice Chair. This bill was “postponed indefinitely” by that committee, less than a month later, without ever being heard in the House.

This bill would have required mortgage brokers to verify and document employment, income and collateral of borrowers. It would have required them to verify that the principal, interest, taxes and insurance combined with other loan repayment obligations would be less than 50% of the monthly household income. In the case of an adjustable rate mortgage- the payment after the first rate adjustment would’ve had to fit these guidelines, based on income verified prior to purchase. It would’ve barred loans which contain a provision allowing the creditor in its sole discretion, to accelerate the indebtedness (demand payment in full NOW). It did not bar lenders from demanding full payment in the event that the borrower failed to abide by the material terms of the loan (i e. quit paying). It also would have prohibited lenders from charging abusive late fees (more than 5% of the payment past due) on payments that were at least 15 days overdue; and prohibited them from charging a late fee twice for the same late payment. It would have barred any mandatory arbitration clause which “limits in any way the right of the borrower to seek relief through the judicial process for any claims.” The violation of this act would have made the mortgage brokers liable to the borrower for actual damages, statutory damages (equal to the finance charges agreed to in the loan- plus 20% of the amount financed for willful and knowing violation); punitive damages if the violation was malicious or reckless; and reasonable costs and attorney fees. In addition the court may grant injunctive… and other equitable relief.

This bill was replaced with House Bill 02-1259, an Act Concerning Protection of Consumers’ Home Ownership Equity. This bill allowed mortgage brokers to make an “occasional” mortgage without verification so long as it could be shown that it was not a common practice. It allowed the mortgage broker to figure the borrower’s ability to repay the loan based on “projected income” and penalized the borrower for false statements used by the mortgage broker to qualify their ability to repay the loan. It codified the use of binding arbitration by the mortgage lender- as long as the arbitration meeting would be held within proximate distance of the property. The lender was required to pay 50% of the filing fees and 50% of the costs for the first day of arbitration. It also required the lender to place a signed “Consumer Caution” disclaimer notice in the settlement packet or have it signed by the borrower within 30 days of settlement. The disclaimer basically stated, “If you obtain this loan…you could lose your home, and any money you have put into it, if you do not meet your obligations under the loan…Property taxes and Homeowners’ Insurance are your responsibility.” This signed statement would have fulfilled the lender/broker obligation. Just FYI, Ameriquest Mortgage spoke out in favor of the second bill (HB02-1259) offered by the Republicans, which they actually passed. The first bill (SB02-073) was actually very similar to the guidelines recently passed at the federal level. While it’s heartening to know that at least a majority of our senators back in 2002 recognized that there was a very real problem and offered a solution that would have been approved by the federal government; it’s a shame that Republicans, with Bill Cadman’s active support and assistance, continue to obstruct these much needed fixes.

My Point? How many of these foreclosures could have been avoided if the Senate version of this bill, which had bipartisan support, had been passed in the House during the 2002 session and gone into effect as of Jan. 2003? The second bill actually gave the lenders and brokers a free pass- so long as they slipped a paragraph long disclaimer into a settlement package along with the other 15- 30 pages that required buyer signature.

Folks, we need someone who will stick to their guns and fight for fairness on these consumer protection bills. In some cases, such as this, no bill would have been better than a bad one.

I will be that someone if I’m elected to this seat.

- Diane D. Whitley

At least Bill Cad-man lives up to his name.........