November 16, 2011

Recently, we have had many inquiries from Colorado homeowners as to the effect of a Rule 120 Motion and hearing, and communications reflecting a misunderstanding of the procedure. We urge Colorado homeowners to read this article so that they know how the Rule 120 system works and what remedies are available.

In a Rule 120 proceeding, the alleged creditor files a Motion for an Order Authorizing the sale of certain real estate (which is the homeowner’s property). The Motion must set forth certain specific facts, and requests that the Court set a date and time for a hearing on the Motion where the alleged creditor will ask for an Order authorizing the sale of the property.

The matter is thereafter set for a hearing by a Notice of Hearing, which notifies the homeowner that on a date and time certain, a hearing on the Motion will be held at a specific court location. The Notice specifically provides that if no response to the Motion is filed by a date certain before the hearing (usually within 5 days before the date of the hearing), that the Court may cancel the hearing and authorize the foreclosure and Public Trustee’s sale without further notice.

The reality is that if no response is timely filed opposing the Rule 120 Motion, there is no “hearing”; the court simply enters an Order authorizing the sale as the Rule 120 Motion is deemed “uncontested” as the homeowner did not properly or timely oppose it.

If a homeowner files a timely response properly opposing the Rule 120 Motion, a hearing is thereafter scheduled for a day some time in the future, and NOT on the day set forth in the Notice of Hearing. Once the matter is properly contested, a separate hearing has to be scheduled at which time the alleged creditor must present evidence to support its claim and request that a sale date be scheduled some time in the future. The homeowner has the opportunity, at that heaaring, to present matter to oppose the Motion. What usually happens is that the alleged creditor will ask that the sale be on the date which is set forth on the Public Trustee’s “Combined Notice”, which is a separate document sent to the homeowner, if there is sufficient time before said date to do so.

As such, if a homeowner properly and timely opposes the Rule 120 Motion, the house cannot be sold on the date of the “hearing” on the original Notice of Hearing for the Rule 120 Motion. On that date, Orders for sales are entered if there is no timely and proper opposition filed; if an opposition is timely and properly filed, the matter is removed from the date on the Notice of Hearing for the Rule 120, and the court schedules the matter for a separate “evidentiary” hearing.

A “timely and properly” filed opposition to a Rule 120 Motion is ONLY done by an attorney. There are specific matters which must be put into the opposition, and Colorado also has electronic filing and service requirements as well for service on the alleged creditor. The other problem is that “foreclosure mill” attorneys may not coordinate a hearing date with the homeowner who is not represented by counsel, and may just set it on their own. We have also known foreclosure mill attorneys to render false information to unrepresented homeowners as to what the law and procedure is.

As a contested Rule 120 hearing is very narrow in scope, even if a homeowner’s challege to the Rule 120 Motion is unsuccessful, the homeowner can still file a separate lawsuit to seek to stop and challenge the foreclosure. There is no preclusive effect of an adverse Rule 120 disposition which precludes the filing of a separate challenge to the foreclosure. We have, however, been advised by homeowners that foreclosure mill attorneys have told unrepresented homeowners that if they lose the Rule 120 hearing that the matter is over and they should not make any further challenge to the foreclosure. We even had a situation this week where a foreclosure mill attorney told a Judge that “the standing issue was already decided at the Rule 120, so this lawsuit will not succeed”. The law, however, is otherwise, and the matter is in fact progressing to a full evidentiary hearing on the homeowner’s request for a preliminary injunction.

Another problem is that the Notice of Hearing on the Rule 120 filed by the foreclosure attorney may be inaccurate or misleading. An example of this is in a Rule 120 Notice filed by a foreclosure attorney in one of our cases which says: “If you dispute the default or other facts claimed by (alleged creditor, which will remain unnamed for purposes of this article) to justify this foreclosure under the Soldiers’ and Sailors’ Relief Act of 1940, as amended, you must make a written response to the Motion, stating under oath the facts upon which you rely and attaching copies of all documents which support your position.”

This Notice is absolutely misleading and inaccurate as it leads the homeowner to believe that the only proper challenge to the Rule 120 Motion is pursuant to the Soldiers’ and Sailors’ Relief Act of 1940, when the truth is that the Colorado Supreme Court issued a published decision in the year 1989 which specifically held that issues as to whether the alleged creditor is the real party in interest may be raised in a Rule 120 hearing, and that a court which does not permit this to be raised (and confines the matter to “default” and “Soldiers’ and Sailors” issues) commits due process violations and reversible error.

Again, a non-attorney homeowner is not going to know this or how to properly present it to the Court. Thus and again, we strongly urge homeowners facing foreclosure in Colorado to consult an attorney who practices in this area. Trying to do this without an attorney is dangerous at best.

Finally, as with all litigation, there is no certainty that a particular Judge is going to accept the homeowner’s challenge to either the Rule 120 Motion or a challenge to a foreclosure in a subsequent lawsuit. The majority of the real issues related to securitization, compliance by a securitized trustee with the PSA, etc. have not been addressed by the Colorado appeallate courts, so there is no firm guiding law on these issues at this time. We are and will continue to bring these issue to the fore in Colorado, as other states have already decided these issues in the homeowner’s favor, and Colorado courts are permitted to look to the law of other states for guidance if there is no Colorado law “on point.”

Jeff Barnes, Esq., www.ForeclosureDefenseNationwide.com