August 29, 2014

As those of you who follow developments in foreclosure law know, the Lisa Blumfiel case in Colorado resulted in a written decision by Colorado Federal Judge Martinez that Colorado’s Rule 120 process, by which a non-judicial foreclosure is instituted through a non-adversarial “show cause” type proceeding, may be unconstitutional. The process does not permit any discovery or any appeal of an adverse decision, and only requires the “bank” to present minimal evidence in order to be entitled to the entry of an “Order Authorizing Sale” (OAS) to schedule a trustee’s (foreclosure) sale of someone’s property. Although a homeowner may assert real party in interest defenses in a Rule 120 hearing, there is no pre-hearing discovery, so the homeowner is at a distinct disadvantage while the “bank” is given all of the advantages. This is another form of what is called “disparate treatment” by a “state actor” (the Court) which treatment is illegal under the Federal civil rights laws.

The homeowner may file a separate action if an OAS is entered following a Rule 120 hearing and may challenge the foreclosure, but of course this requires the homeowner to expend significant effort (and money) filing a separate lawsuit, seeking a TRO to stop the sale, then seeking to convert the TRO to a preliminary injunction, and post a bond to preclude any sale while the foreclosure challenge proceeds. This process turns “innocent until proven guilty” on its head: the homeowner is presumed guilty as a result of the 120 hearing, and must thereafter “prove” that the bank has no authority to foreclose and pay for the privilege of doing so by posting a bond.

We are challenging this process in both the Colorado Court of Appeals and in a separate Federal action, based in part upon the concerns of Judge Martinez and upon the due process infirmities in the entire Rule 120 procedure. The local foreclosure mill which was handling the case for the “bank” was recently removed and replaced with a national law Firm, so apparently the bank is concerned.

On the continuing issue of homeowners being treated differently than other civil litigants, we recently had a situation where our client (represented by Mr. Barnes) sought to amend his defenses to the foreclosure based on recent case law which now permits a homeowner to assert defenses when they have been told that they had to be “behind” in their mortgage payments to be considered for a loan mod, only to rely on this and not make payments but with the “bank” thereafter telling them that they do not qualify for a loan mod because they are in “default.” When the homeowner attempts to make up the payments, the “bank” refuses to accept payments and returns any payment made, “as the matter is now in foreclosure.” This results, of course, in a fraudulently manufactured foreclosure.

Motions to amend defenses are routinely granted. Here, however, the motion was denied because granting it would have, as a matter of law, removed the case from the trial calendar. That is a simple downline effect of the granting of such a motion even though, as here, our client did not request that the November trial date be stricken. The attorney for the “bank” filed no opposition to the Motion, but argued that the Motion was filed for the simple purpose of delaying the trial (again, even though no such relief was requested in the Motion).

The Judge denied the Motion without explanation. When he was questioned by Mr. Barnes as to the reason for the denial (so that a proper record could be made for appeal purposes), the Judge responded by saying “I don’t have time to explain that; I have a whole courtroom of people here. Goodbye.”

How long would the “explanation” as to the reason for denying the Motion have taken, 2 seconds? Remember, the attorney for the “bank” filed NO OPPOSITION to the Motion. Thus, the ONLY reason for the denial was due to the legal effect of the case being removed from the trial calendar, which is not a recognized legal reason to deny due process by failing to permit an amendment to defenses.

Significantly, during the course of the 50+ hearings that were in front of this one, the same Judge repeatedly denied JOINT AND AGREED Motions filed by attorneys for banks and homeowners to continue trials as the homeowner was in a loan mod or other reason. It is unfathomable that the Judge denied agreements reached between the attorneys simply because the Judge wants to railroad trials through the system.

What needs to happen is that petitions to the rules committees need to be made, and demands need to be made to the various state legislatures to enact statutes precluding a Judge from refusing to honor agreements of the very attorneys on the case which agreements are designed to, for example, try to settle a case through a loan mod. If all states had anti-dual tracking statutes as California and Hawaii do (which prohibit maintaining or advancing a foreclosure case if the homeowner is in loan mod negotiations), a lot of this nonsense would probably be avoided. High time the other states smell the coffee and start protecting the interests of the very people who elect the legislators to begin with.

Jeff Barnes, Esq.,