MAKING PROGRESS IN COLORADO; ISSUES RAISED BY GOODWIN STILL UNRESOLVED; MASSACHUSETTS CLERK REJECTS AND REFUSES TO FILE ANY DOCUMENTS EXECUTED BY KNOWN “ROBO-SIGNERS”

June 14, 2011

As those of you who follow this website know, Colorado has essentially a two-phase foreclosure process after a default is declared: the first being what is called a “Rule 120 proceeding” to schedule a Public Trustee’s sale, then the actual sale itself. The Rule 120 is essentially a “probable cause” hearing where the movant (the party claiming the right to foreclose) claims a default and, if applicable, that the borrower is not in the military, and requests that the Court schedule a sale date. The standard is quite low for the movant to prevail (simply establishing a “default” without going to the merits of whether the party claiming the default has the right to do so), but there is no preclusive effect on any separate proceeding the borrower may file to challenge the foreclosure; that is, the granting of a Rule 120 Motion to schedule a sale does not operate to preclude the assertion of defenses in a separately-filed action to challenge the foreclosure.

The problem is that although Colorado case law permits the real party in interest issue to be raised at a Rule 120 hearing, there is no direction from the Colorado appeals courts as to what the Rule 120 court is supposed to do with such matters when raised. In 1989, the Supreme Court of Colorado issued the Goodwin v. District Court for the 16th Judicial District decision, 779 P.2d 837 (Colo. en banc 1989) which held that the real party in interest issue can be properly raised in a Rule 120 proceeding, and that a court’s refusal to consider such evidence in resolving the issue of default adversely is tantamount to the taking of propery in summary fashion without any hearing at all, which is a violation of due process.

However, the decision does not direct the courts entertaining Rule 120 proceedings as to what weight to attach to real party in interest issues or whether if the borrower’s real party in interest issues raise questions of fact as to the legality of the party claiming default sufficient to deny the Rule 120 Motion. This procedural problem came to light in a Rule 120 hearing yesterday in Logan County, Colorado where Mr. Barnes represents a borrower who opposed the Rule 120 Motion in a case involving a securitization and the lack of any evidence of an assignment of the Deed of Trust or compliance by the securitized trustee movant with the PSA of the Trust of which the movant is the claimed “trustee”.

The court stated that the matters raised by the borrower as to the lack of evidence of any compliance by the securitized trustee bank with the PSA, the lack of any assignment of the Deed of Trust, and other issues were affirmative defenses to be asserted in a separate proceeding to challenge the foreclosure in an action for declaratory and injunctive relief where the issue of the foreclosing party to overcome these defenses is to be litigated, as the scope of the Rule 120 hearing is very narrow and the standard for the movant to have a sale date set is “very low”. This was the first such pronouncement that we are aware of by a Colorado court that issues surrounding compliance with the PSA and the like are in fact affirmative defenses to a foreclosure, but by a separate action. We believe that the procedural questions left unanswered by Goodwin contributed to this pronouncement, as Goodwin was raised by both sides at the Rule 120 hearing, albeit for different purposes.

Further, as agreed to by both counsel, there is no Colorado appellate decision as to whether MERS can effect any assignment of the Note or Deed of Trust or the circumstances under which any MERS assignment may take place. Colorado thus remains one of those jurisdictions where issues surrounding MERS and securitization issues are as yet undecided on the appellate level.

Separately, a recording Clerk in Massachusetts has stated that foreclosure documents executed by known “robo-signers” will no longer be accepted for recording. This is a very positive development toward precluding the perpetration of fraudulent foreclosures. The statement comes following the Ibanez decision which was directly decided on the issue of a legally flawed recording of foreclosure documents.

Jeff Barnes, Esq., www.ForeclosureDefenseNationwide.com

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