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Colorado Bankers Association Derails Superlien Bill at the 11th Hour

By Lawrence B. Leff, Mark K. Payne, Suzanne M. Leff, Stan V. Jezierski

At the request of Representative Deb Gardner, the sponsor of House Bill 11-1197 ('HB 1197'), the bill was postponed indefinitely today by the House Economic and Business Development Committee. What does that mean? It means that HB 1197 is dead for this legislative session.

After weeks of diligent and painstaking work by Representative Gardner and the stakeholders, the original bill was scrapped and rewritten in a form where all of parties had to compromise on some issues but also received benefits. Representatives of CAI's Colorado Legislative Action Committee, CAI's Attorney Committee, bankers, and attorneys who represent the lenders in public trustee foreclosure sales were all included in the negotiations. Everyone at the table was invited to participate fully in the process – and most did. The result of countless hours of work and compromise was the strike-below that is described in our February 23^rd blog posting.   

The Colorado Bankers Association ('CBA') supported the bill in concept until today at the 11^th hour. Instead of participating in drafting the strike-below, the CBA took an opposed position on the bill.  The lobbyist for the CBA testified that essentially the superlien provisions of the bill give homeowner associations ('HOAs') an unfair advantage over lenders. What she didn't testify to is:

 

?HOAs are not-for-profit corporations which rely upon assessment income to cover the costs associated with the upkeep and maintenance of common areas and protecting the property values of the homes which are the security for mortgages.

 

?When lenders foreclose on a mortgage, the public trustee foreclosure process can take up to two years. During that period of time, the owner of that home is not paying assessments to the HOA. In fact, the owner typically quits paying assessments months before the lender even begins the foreclosure process. The other residents of the HOA have to pick-up the tab for the assessments which are not paid.

 

?HOAs don't have any control over who gets a mortgage. Should HOAs have to share this risk with lenders?

 

So what does this mean? HOAs and lenders will continue to experience uncertainty with the superlien and foreclosures. Also, the opportunities presented by the strike-below were unfortunately squandered by the events of today. The issue could be brought up in late bill status. However, that seems unlikely at this time. We will keep you updated on any new developments on the superlien. 

Full post as published by Colorado Homeowners Association Law Blog on February 24, 2011 (boomark / email).