Colorado "Rule 120" Hearings Likened To A Mirage Offering Borrowers Facing Foreclosure Hope That Disappears The Closer They Come To It

The Denver Post reports:

• Borrowers facing foreclosure in Colorado have a right to a hearing before a county judge. But consumer advocates argue the proceeding, called a Rule 120 hearing, is so narrow in scope it doesn't provide much protection or relief.

• Public trustees or county treasurers handle foreclosures in Colorado, and they can't sell a home at auction without a judge's approval. The hearings, however, usually deal with only two issues — are borrowers delinquent on their mortgage payments or are they active-duty members of the military, which provides special consideration. That contrasts with the 23 states where judges handle foreclosures in civil courts and borrowers obtain more robust legal protections.

• Zachary Urban, director of housing counseling with the Adams County Housing Authority, estimates that fewer than 15 percent of borrowers he works with attend their Rule 120 hearings. [...] Urban likens the hearings to a mirage offering borrowers hope that disappears the closer they come to it. "You can't go before the judge to explain how you got to that point," Urban said. "It doesn't answer a whole lot of questions, and it doesn't give them a chance to plead on a whole lot of points."

• Borrowers who raise arguments that the Rule 120 hearing won't address can file a separate civil case. But those who go that route are quickly hamstrung by a requirement to post a "supersedeas" bond in the amount of the mortgage debt, said Mike Robinson, a Castle Rock attorney who has contested several Rule 120 hearings.

• Finding someone to back that bond is nearly impossible, given the high risk a home in foreclosure represents, he said. And if borrowers had that much money available to them, they could fix their foreclosures in the first place, Urban added. Removing that bonding requirement via state statute would provide a big step to ensuring that Colorado borrowers get a fairer hearing in the courts, Robinson said. Absent that, Robinson said about the only other way to buy time is for a borrower to file for bankruptcy protection.

For more, see Foreclosure hearings, called Rule 120, may be too limited to help borrowers.