State Issue: Liquidation of Collateral
Background
2010 Version
In October of 2009, representatives from the Colorado Homebuilders Association brought forth concerns about the order and process a bank moves through to recollect losses that have amounted from a loan.
Working in good faith with the homebuilders, CBA’s officers and other volunteer bankers attempted to uncover a common ground to address their problem. However after numerous interactions, the Homebuilders Association decided to introduce an unacceptable bill in the 2010 State legislative session.
SB 127 was introduced in early February 2010 by Sen. Cadman (R – El Paso County) and Rep. Jerry Frangas (D – Denver). CBA was forced to oppose the bill, testified in opposition, and helped defeat it by a 5-2 vote in the Senate Business & Labor Committee.
2011 Version
HB 1139, introduced by Rep. Jim Kerr, is almost identical to the 2010 version of the bill. Once again, it would require a bank to liquidate all collateral associated with a delinquent loan before a lender could approach a guarantor to make the loan whole. The bill will face its first committee hearing on Thursday Feb., 17th. CBA is still educating legislators on the problems with such legislation, and many bankers have reached out to contact members of the committee as well. CBa plans to
CBA’s Opposition
While the industry was sympathetic to the financial pressures many parties face these days, CBA felt that financial hardship does not justify a bill that impairs the right to contract, alters existing contracts, would create an uneven playing field among lenders, and actually restrict credit availability and increase the cost of available credit to borrowers.