Getting your player ready...
Proposed legislation that would have raised an estimated $5 million from banks to provide foreclosure counseling in Colorado died in a committee meeting today.
HB 11-1136, “in a display of partisan politics,” was killed by House Republicans in the Appropriations Committee by a 7-6 vote, said Zachary Urban, of the Adams County Housing Authority, who helped create and championed the bill.
$250 foreclosure fee
The bill would have charged banks $240 for each foreclosure, plus a $10 processing fee to be retained by public trustees.
The $240 fee was expected to raise $5.04 million for foreclosure prevention counseling and help 21,0000 homeowners in fiscal year 2011-2012. The $10 fee would have raised another $210,000, for a total of $5.25 million.
The Colorado Bankers Association and the Colorado Mortgage Lenders Association supported the bill.
“This end to the foreclosure counseling fee bill obviously doesn’t curtail the demand for foreclosure counseling services, and the funding crisis we continue to face as we move forward,” Urban said in e-mail today. “We will move forward, we will continue to promote awareness of both the benefits of housing counseling and the resources needed to bring these services to the citizens of Colorado.”
Bill’s death unexpected
In an interview with InsideRealEstateNews, Urban said he thought the bill had an excellent chance of passing.
“It had such broad-based support that I really was pretty surprised it was killed,” Urban said. He said some Republicans on the committee wondered why banks couldn’t pay their fee on their own, without being mandated to do so by the government. “There were concerns about government involvement,” Urban said. “But I think in something like foreclosures, there should be government involvement. The bill would provide a neutral party to sort out all of the choices for consumers.”
Republican Rep. Cheri Gerou, an Evergreen architect who chairs the committee, couldn’t immediately be reached for comment.
Reaching out to lenders
Urban said that he would be reaching out to banks and lenders to see if they would agree to a voluntary fee to hire more counselors.
“The killing of this bill doesn’t deter us,” Urban said. “The lenders clearly saw the benefit of this bill.”
Rep. Angela Williams, a Democrat from Denver, sponsored the bill.
Foreclosures devastating
She described it as a “bill to protect neighborhoods, preserve home values and help families avoid the devastating effects of foreclosure,” in a statement.
“I’m deeply disappointed in House Republicans for voting against a bill that would have funded the Foreclosure Prevention Hotline, which has helped to keep hundreds of (thousands) of Colorado families in their homes,” Williams continued in her statement. “Homeowners who participate in housing counseling services are 80 percent more likely to avoid foreclosure. This sends a pretty clear message to Colorado’s families: we know you’re struggling, and, frankly, we don’t care. Evidently, many in this body would rather ignore what many of our communities are going through right now.”
The Colorado Foreclosure Hotline, 1-877-601-HOPE, has helped about 30,000 homeowners since it was launched in October 2006.
One early concern was that the $250 fee was initially going to be required at the beginning of the foreclosure process.
But after Boulder real estate attorney Oliver E. Frascona, a shareholder in Frascona, Joiner, Goodman and Greenstein, P.C., posted a letter on InsideRealEstateNews saying that it made more sense to charge the fee at the end of the foreclosure process, the bill was amended.
“And if the bank was able to keep the home out of foreclosure because of the bill, they wouldn’t need to pay the $250,” Urban said. “The amount of money they would save is far greater than the $250 they would pay.”
CMLA: Bill would help rural Colorado
Terry Jones, chairman of the Legislative and Regulatory Affairs Committee for the Colorado Mortgage Lenders Association, said he was surprised and sorry that the bill was killed.
“We firmly believe that the combination of the Colorado Foreclosure Hotline and referring troubled borrowers to the network of counseling agencies throughout the state, is a good way for a consumer to talk to their lenders and find a solution,” Jones said. “Many borrowers, unfortunately, are afraid to talk to their lenders when they are in trouble, so it helps to have a neutral, third-party to talk to.”
He also said that he felt the bill would have brought a “more formal analysis” to track the effectiveness of counseling. Jones also said that he thought the bill would have provided a sustainable source of funding, as there is always a concern that HUD grant that currently fund most of the counseling efforts could be curtailed.
Finally, Jones also believed that the bill would have provided a particular help to distressed homeowners in rural Colorado.
“Foreclosures are growing in rural areas of the state, while much of the counseling help is concentrated more along the Front Range,” he said
Jones said he hopes a similar bill will be re-introduced next year.
“Hopefully, there will be another opportunity for it,” Jones said. “It’s not like the foreclosure issue is going away. Some pundits think it could be with us until at least 2014.”
