US Bank walks away from foreclosure on Aurora woman
Posted: 05/11/2013 12:01:00 AM MDT
Updated: 05/11/2013 11:54:49 AM MDT
Lisa Brumfiel leaves federal court on Monday after a hearing to stop foreclosure on her Aurora home. (Joe Amon, The Denver Post)
US Bank on Friday backed down from its efforts to foreclose on an Aurora woman whose federal court battle against it has taken on the constitutionality of Colorado’s foreclosure laws.
Just days after lawyers for the bank told a federal judge they’ve always had the original documents necessary to foreclose on Lisa Kay Brumfiel’s tri-level house legally — and U.S. District Judge William J. Martínez said to produce them — the bank rescinded the whole thing.
Despite the move to make a nearly two-year nightmare to save her house go away, Brumfiel on Friday insisted she’s pressing on.
"I would rather risk losing my house again than to selfishly watch this corrupt process continue for others," said Brumfiel, a 43-year-old part-time saleswoman who took on the court battles without a lawyer. "I know too much, and I don’t want the blood of it on my hands."
But the ultimate decision might now be out of her hands.
US Bank on Friday told the Arapahoe County public trustee to withdraw the foreclosure case it filed in September 2011, then filed a request with Arapahoe County District Court Judge J. Mark Hannen to dismiss the order he signed last December to sell Brumfiel’s house.
Closing the foreclosure case is automatic. The motion to the judge is not.
The bank’s move could be a tactical one, legal experts said, designed to make not just Brumfiel’s foreclosure go away, but her federal lawsuit, too.
Theoretically, US Bank could get Hannen to dismiss his order — whether Brumfiel agrees or not — and then ask for the federal case to be dismissed. Should Martínez agree, the bank could start a new foreclosure case against Brumfiel, forcing her into a whole new cycle of court battles.
But Martínez could also choose to ignore the request and move ahead with Brumfiel’s claim that Colorado foreclosure law violates her constitutional right to due process.
Brumfiel’s federal lawsuit initially sought to enjoin the county foreclosure sale of her house. To obtain that, Brumfiel must first prove she’s in danger of imminent harm if the sale occurred.
Martínez issued an interim preliminary injunction Monday and scheduled a hearing for Wednesday.
But with no foreclosure, there might be no case.
"It’s a tactic that would allow you to argue there’s no longer any immediate harm because there’s no longer a foreclosure," Keith Gantenbein, a foreclosure lawyer not involved in the case, said of the bank move to rescind.
"But then you turn right around and file again, forcing the homeowner to go through it all for another two years. It’s designed to wear you down," he said. "Sadly, it happens a fair bit."
Attorneys for the bank refused to comment.
Brumfiel said the bank’s initial offer to rescind, sent through its foreclosure attorneys at the Castle Law Group, came at midday Thursday and was sent to the lawyer who represented her in the original foreclosure proceeding 18 months ago.
That proceeding, known as a Rule 120 hearing, is at the core of Brumfiel’s battle. The hearing is the only time a homeowner has the chance to challenge a bank’s right to foreclose without having to file their own costly lawsuit.
Colorado’s foreclosure process requires a state district judge to sign off on the sale of a property but first must determine whether the homeowner is in default of their loan and that they are not in the military.
Brumfiel tried to challenge that US Bank didn’t prove it had the right to foreclose on her house because it had not shown how it acquired the rights to her loan and or that it had been assigned the deed of trust to the loan.
(The loan note is the promise to repay; the deed of trust is the lender’s right to foreclose on the property if the borrower defaults.)
Brumfiel eventually waived her right to the hearing and signed a stipulation that she was likely to lose, mostly because Colorado law allows foreclosure lawyers to sign a statement saying — without having to prove — that their client, typically a bank or other lender, properly has the note and deed of trust.
It is that law Brumfiel is challenging in federal court, saying it violates her 14th Amendment right to due process.
But she needs the injunction first.
In a hearing Monday, attorneys for US Bank and the Castle Law Group, the Denver firm that handles the most foreclosures in Colorado, waved papers they said were the original deed of trust and note on Brumfiel’s house, a $169,000 loan she took out in 2006 with First Franklin Financial.
At the time, First Franklin was the nation’s fifth-largest subprime lender. It halted operations in 2008 and was acquired by Merrill Lynch.
The lawyers said all the documents carried the proper indorsements — legal transfer of ownership based on a signature, different from an endorsement, which is the signature itself.
Martínez agreed to have a full hearing on the matter Wednesday.
In Colorado, signatures showing transfer of ownership in a loan and deed of trust are not required. Known as "indorsed in blank," it is normally signed by the loan originator and left blank where the name of the bank to which ownership is transferred should be.
"The Rule 120 is harming Coloradans by eliminating almost any chance of due process, and relying on foreclosure attorneys to be ethical in the process of acquiring your home," Brumfiel said Friday.
In an order filed Thursday, Martínez told US Bank that he wanted to see original endorsements on the note and deed of trust by Friday. Endorsements are the signatures that appear on the back of the documents showing the chain of ownership.
The bank told the court Friday that it had only the blank undated indorsement on the loan from First Franklin.