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Denver Foreclosure Nightmare

800 Foreclosures withdrawn

April 25, 2007


Hundreds of Denver foreclosures have been withdrawn and must be restarted -- leaving delinquent borrowers in the properties months beyond what lenders had expected. The clerk restarting the process is up for election.

More than 800 filings for foreclosure were withdrawn Tuesday in Denver's public trustee's office after the public trustee, who processes foreclosure actions, failed to send notices to the delinquent borrowers within the required time.

All will be refiled within two weeks in accordance with an agreement between attorneys for the lenders and servicers and Clerk and Public Trustee Stephanie Y. O'Malley under which all foreclosure filings would be withdrawn and then restarted.

The filings date back as far as two months, according to a worker in the trustee office.

Meanwhile hundreds of delinquent borrowers have been able to remain in their homes without making their mortgage payments. Also, the public trustee's office will have to record all the withdrawals before the refilings can be made.

"Hopefully within two weeks we'll have most of those files going again," the spokesman said.

Under Colorado law, the public trustee must send out notices to delinquent borrowers within 20 days of a filing for foreclosure.

Failure to do this following many filings began late last year under O'Malley's predecessor, Wayne Vaden, who resigned from office. O'Malley, daughter of former Denver Mayor Wellington Webb, was appointed acting clerk and public trustee by Mayor John Hickenlooper on Jan. 9.

She had no previous experience in the clerk's office.

When O'Malley assumed office, she said she found a backlog of hundreds of foreclosure filings for which notices had not been sent to delinquent borrowers. The notices inform borrowers of the foreclosure action and explain opportunities for curing their delinquent mortgages.

One attorney who specializes in foreclosure actions told MortgageDaily.com that the Denver situation "sounds like a mess" that could not happen in Illinois, where he practices. Another attorney explained the only alternative for the route being taken in Denver would be to file for judicial foreclosures, a process that generally is more costly and time-consuming that nonjudicial foreclosures.

O'Malley, an attorney, had previously served as Director of Excise and Licenses, where she was responsible for processing liquor and cabaret licenses applications. She was appointed to that position in 2003.

The city clerk also is the city recorder and the county ex-officio clerk as well as public trustee. The trustee's duties include processing foreclosure actions, providing foreclosure cure information and other assistance to property owners and conducting public auctions.

O'Malley is up for election to her first full term next Tuesday, facing opposition from Jacob Werther, a 12-year veteran of the clerk's office.

Colorado has one of the highest foreclosure rates in the nation, according to RealtyTrac, and had the highest rate of all 50 states in nine of the 12 months of 2006. And only in 12% of the cases, according to the Colorado Division of Housing, did borrowers catch up on their delinquent payments and cure their mortgages.

Jerry DeMuth is an award winning journalist who has been reporting for four decades.

e-mail Jerry at [email protected]
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