Be aware of Colorado Bill B which will be decided on in the 2024 legislative session.

[Nate Marshall]

Colorado Bill B is being proposed in the session that starts in a few weeks. It will likely pass the house is 49-16 dems to republicans. 

It would require that homeowners who have been foreclosed would be required to be given the excess funds upon the bank or mortgage company disposing the property. 

[Don Konipol]

Quote from @Kevin Sobilo:

@Nate Marshall, it doesn't matter if it passes or not. There have been legal decisions at the federal level I believe that have determined this is that is required. States are just clarifying their state laws to conform to the federal case law.

It only makes sense though, if someone loses their house to a foreclosure where the amount owed plus costs to run the auction are only $50k but the sale price is $75k, its only right that the $25k in proceeds leftover should go to the owner but some states were taking advantage of people and keeping it. 

Kevin, I think you may have missed the "detail". I believe that in all states any price obtained at the foreclosure auction in excess of debt plus costs accrue to the benefit of the borrower/former owner already. I believe this law is about the mortgage holder bidding in the loan amount at the auction and obtaining ownership of the property via foreclosure deed since the note holder is the highest bidder at auction (no sale to third party because no one bid all that was owed and the note holder decided not to accept a loss). Then after gaining ownership through the foreclosure auction, the lender sells the property as an REO. If the lender sells it say 18 months later for more than the amount owed plus costs, the law intends to "claw back" the amount above for the benefit of the party foreclosed upon.

 A major problem is that (1) there’s no accounting for time value of money and no accounting for inflation.  So if I foreclose on a property, gain ownership through bidding in the amount owed at foreclosure sale, and finally sell the property after holding it 2 years while inflation rips away at 15% annually, I gained nothing (in terms of purchasing power) by selling for 30% more then my “all in” costs; yet I’d owe that 30% to the previous owner.  

Obviously, if the property sold at auction to a third party, for $1 above the “all in cost” then the previous owner would be owed that $1.  Seems pretty easy to avoid this law for the small or individual note holder; just have a friend bid in an amount equal to the amount owed and since the property “sold” for no more than the amount owed plus costs there is no profit to send to the foreclosed owner.  A resale is obviously beyond the scope of the proposed law - if the law included resales then nobody would bid at the foreclosure auctions.  Although with the aggressive leftist policies being proposed by the radical wing of the Democratic Party and the lack of understanding of basic economic principles by the followers of Bernie Sanders, I shouldn’t be surprised by ANYTHING they come up with.  

Once more the politicians are providing a solution for something to which there is no problem.  If the properties foreclosed on had any equity at the time of foreclosure, they would have sold before foreclosure.  Foreclosure doesn’t take place 5 minutes after default; even in Texas the debtor is usually 6 months or more in default before a foreclosure takes place. Many states even have a period of time with a right of redemption; in fact note holders don’t want real estate, they want to be paid what is owed.  The laws have bent over backwards providing property owners with the most time and opportunity to keep their property - loan modifications, arbitration, an almost flawless property transfer and sale mechanism, and lenders with tremendous pressure on them to “negotiate” mutually agreeable settlements.  Any “profit” in the resale of the property accruing to the lender inevitably occurred AFTER the property went into foreclosure.  So in actuality the legislature is trying to impose a WEALTH TRANSFER from the lender to the borrower, similar to the way NYC tenant laws transfer wealth from the landlord to the tenant. 

The only possible results of this will be less revenue to offset costs for note holders since most foreclosures result in a loss for the lender. To make up this and reach minimum targeted ROI lenders will have to increase rates - specifically to marginal borrowers. So marginal borrowers will pay for this wealth transfer. Once more proving the most basic economic concept - THERE IS NO SUCH THING AS A FREE LUNCH.