Foreclosure councilors facing cuts as need grows

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Mary Lou Wild is district manager for Consumer Credit Counseling Services of Southern Colorado. She’s had to reduce the foreclosure counseling sessions because money for the service is drying up.

Mary Lou Wild is district manager for Consumer Credit Counseling Services of Southern Colorado. She’s had to reduce the foreclosure counseling sessions because money for the service is drying up.

In a shocking turn of events for local housing advocates, a bill that had the potential to ease the state’s foreclosure crisis was killed in committee last week.

That will leave housing counseling agencies scrambling for resources and could have a broad effect on operations designed to keep people in their homes.

“We don’t have adequate funding,” said Zachary Urban, director of the Adams County Housing Authority. “Housing counseling was left out of the latest federal budget so we were relying on this bill to supplant those federal dollars. We’ve never had to turn anyone away and have always been able to help people in a short amount of time, but this will seriously impact the level of service we can offer going forward.”

House Bill 1136, sponsored by Rep. Angela Williams, D-Denver, would have established a fund to subsidize Colorado’s foreclosure counseling agencies.

The money was set to come from a $250 surcharge to be paid by banks at the end of the foreclosure process, and it was estimated the fee would generate $5 million for foreclosure counseling operations throughout the state.

But the House Appropriations Committee, made up of seven Republicans and six Democrats, voted the bill down on a straight party line vote.

“I was very surprised,” Williams said. “It had bipartisan support and we worked closely with the stakeholders and with the Appropriations Committee to address all of their concerns. To have it killed on a party line vote – this is not a partisan issue. It’s something that affects my constituents and families across Colorado.”

According to Urban, housing counseling has proven effective in helping homeowners avoid foreclosure.

The Colorado foreclosure hotline received 135,000 calls since its inception four years ago. Of those, roughly 32,000 clients went on to meet with a foreclosure counselor, with about 28,000 reaching a positive solution to their foreclosure.

Those positive solutions are expected to become more rare when funding dries up. The Consumer Credit Counseling Service of Southern Colorado is struggling to meet the increased demand for their services.

In January, the CCCS office in Colorado Springs had to reassign two housing counselors and reduce the number of slots available for counseling appointments.

“I’ve heard from other organizations that are deciding not to do housing counseling at all because of the funding it requires,” said CCCS District Manager Mary Lou Wild. “Others are reducing staff or not replacing staff even though we expect the demand for our services to continue.”

In most parts of the country, calls are routed through a national call center, but Colorado is unique in that it has a local foreclosure hotline. Urban said lack of funding is already putting a strain on the hotline’s resources.

“The Pikes Peak Foreclosure Prevention Partnership in Colorado Springs closed recently, so all of those calls are being forwarded to the foreclosure hotline. It adds a burden to other agencies in the region,” he said. “This vote stops funding for foreclosure counseling but it doesn’t stop foreclosures, and the demand for our services is continuing to grow.”

Part of what made the Appropriations Committee vote so shocking was that up until last week the measure looked like a lock.

Both the Colorado Bankers Association and the Colorado Mortgage Lenders Association endorsed HB-1136 despite the fee it would impose on their members. The bill also moved through the Business and Economic Development Committee with bipartisan support, had the Colorado Association of Realtors and Gov. John Hickenlooper on its side, and received Senate sponsorship from Republican Steve King of Grand Junction.

In February, it seemed the only potential hurdle the bill faced was in ensuring the fee was paid by the banks – not passed on to the consumer. As originally written, the fee was to be paid at the beginning of the foreclosure process, and some believed that banks would pass the fee on to the person being foreclosed upon at the end of the process.

Eliminating that possibility was a sticking point for the Colorado Public Trustees Association, who then collaborated with the Colorado Housing Counseling Coalition to rework the bill. The fee was moved to the end of the foreclosure process – a concession that would have reduced the total amount of funds that could be collected, but that seemed to keep the banks from passing the fee on to consumers.

“In the event that a foreclosure could not be avoided, we moved the bank fee to the foreclosure sale (the end of the foreclosure process),” Williams said. “We adequately addressed this issue.”

The CPTA was satisfied with these changes, but Republicans on the Appropriations Committee were either unaware of the changes or not convinced that the changes were sufficient.

“It’s a $250 fee to be paid by the consumer,” said Rep. Marsha Looper, R-Calhan, one of the members on the Appropriations Committee who voted against the bill. “We know the banks would just pass that on to the consumer and I couldn’t support that.”

Regardless of how the fee was interpreted, Williams said it was not the responsibility of the Appropriations Committee to debate the merits of the HB-1136 – that had already been done when the bill passed the Local Government, and Business and Economic Development Committees.

“The role of the Appropriations Committee is to ensure that there is nothing in the bill affecting the general fund, and it passed that test,” Williams said. “But somehow the committee didn’t stay focused on that and the conversation went in another direction. We weren’t there to debate the bill, we were there to make sure there were no appropriations, and there weren’t.”

Numerous phone calls and emails to the six other Republicans on the committee, including Appropriations Chairwoman Cheri Gerou, R-Evergreen, were not returned.

The number of foreclosures in El Paso County has skyrocketed in recent years, peaking at 5,470 in 2009. Foreclosures have dipped slightly so far in 2011, but many believe this is an aberration as banks temporarily pull back because of the robo-signing scandal.

“We’ve so far trended lower than I expected, but filings will pick up in the latter part of the year,” said El Paso County Public Trustee Tom Mowle.

Even though the bill can’t be resurrected in 2011, Williams isn’t giving up hope.

“I might bring this back next year,” she said. “This is something I’m passionate about.”

Williams has the right people on her side to do this. One of the arguments from the Republicans on the Appropriations Committee is that the bank fee shouldn’t be legislated – it should be paid by the banks voluntarily. Urban is now taking up that fight.

“I’m pushing now to see if (the banks) will do this,” he said. “We’ve tried before and it’s hard to get all of the lenders on the same page. But if the people in power wouldn’t support this, I guess we just have to take it up.”

How they voted

Appropriation Committee votes for HB 1136, which would extend foreclosure counseling funding.

YES

Mark Ferrandino, D-Denver

Dickey Lee Hullinghorst, D-Boulder

Andy Kerr, D-Lakewood

Dan Pabon, D-Denver

Jim Riesberg, D-Greeley

Judy Solano, D-Thornton

NO

Brian DelGrosso, R-Loveland

Bob Gardner, R-Colorado Springs

Marsha Looper, R-Calhan

Jerry Sonnenberg, R-Sterling

Glenn Vaad, R-Mead

Jon Becker, R-Fort Morgan

Cheri Gerou, R-Evergreen