Last week the House introduced HB 13-1249 which is a bill that attempts to clean up the foreclosure issues that have plagued residential lenders. The Bill’s stated purpose is:
“Concerning residential foreclosures, and, in connection therewith, requiring that foreclosures be initiated only by persons with a security interest in the property and requiring good-faith dealing in loan modification negotiations.”
Given this stated purpose, the bill is aimed at addressing the issues presented by the Mortgage Electronic Registration Systems (“MERS”) in which banks were foreclosing on deeds of trust that nobody could really say they owned or not.
The bill also requires the good faith negotiations in loan modifications. While this is a great tool for delinquent homeowners, it may slow down bank foreclosures of properties in community associations, which may have detrimental impact on the association and the owner owners. If an owner is negotiating with their bank and not paying assessments, the pending resolution of the mortgagee delinquency may result in slower resolution of the Owner’s obligation to the association” While this may very well be needed, it may be yet another slowdown in the smooth operation of an association.