A Colorado House bill that has the potential to ease the state’s foreclosure crisis is under review by the Business and Economic Development Committee, but there’s a problem.

The association that represents the county public trustees who will have to implement the measure has yet to back the proposal, and the El Paso County public trustee has questions about it.

House Bill 1136, sponsored by Rep. Angela Williams, D-Denver, would establish a fund to subsidize the state’s foreclosure counseling agencies. The money would come from a $250 surcharge paid by banks at beginning of the foreclosure process.

The administrative burden of processing and levying the fee would fall on each county’s public trustee, and the Colorado Public Trustees’ Association is unhappy with portions of the measure.

“(The bill) has some great concepts and we like the idea of where the money will go,” said El Paso County Public Trustee Tom Mowle, who is on CPTA’s legislative committee. “We’d just like to see some amendments before it goes further.”

In the bill’s current form, the fact that the surcharge is paid by the bank upfront means that in some cases it will be able to pass the fee back to the distressed homeowner if foreclosure is avoided.

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“I’m not sure that’s entirely appropriate,” Mowle said. “We want it to be clear to everyone that it’s the person being foreclosed on, not the banks, that is ultimately responsible for the fee.”

One solution would be to delay the surcharge until a foreclosure is complete, but that would decrease the total funds collected.

“We’ve talked to the public trustees and other stakeholders about that,” said Colorado Housing Counseling Coalition Vice President Zachary Urban. “It’s important for us to look for a way to allow a lender, if they are foreclosing, to also participate in the solution.”

Rep. Williams could not be reached for comment on possible amendments.

The CPTA is also concerned with what it sees as loopholes in the bill that would allow banks to exempt themselves from the fee. According to Mowle, these exemptions would predominantly affect rural areas that may not have a high volume of foreclosures but that could benefit from the counseling services nonetheless.

“As it’s drafted right now, there are a number of exemptions banks can claim that don’t require verification,” Mowle said. “A lot of those exemptions would take place in counties with fewer foreclosures. Since funding is distributed based on the amount of collected fees by county, some of the rural areas that are already underserved will continue to be so.”

Of Colorado’s 64 counties, 31 had fewer than 100 foreclosures in 2010. The top 10 counties accounted for 80 percent of all foreclosures in the state.

While there is disagreement on particulars of the bill, there is strong support to increase counseling resources for struggling homeowners. This week the Colorado Association of Realtors voiced its support for the bill, and even the Colorado Bankers Association is backing it.

“Generally we don’t support the introduction of new fees on the private sector,” said Tim Powers, the CBA’s director of communications. “But the housing crisis is not over, and counseling is proven to have as high as an 80 percent success rate. Supporting this bill was not a hard decision.”

Powers said the CBA would even support amendments that would close some of the loopholes perceived to be beneficial to banks.

“Our goal is not to avoid these charges, we’re not trying to bounce around this in any way,” he said. “The foreclosure hotline and the counseling services deserve a solid funding source. Our industry has traditionally provided a significant amount of grant money for these programs, so this is not a new stance for us.”

Part of the reason there is widespread support for the effort is because counseling has proven very effective in helping homeowners avoid foreclosure.

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

Colorado is unique in that it has a local foreclosure hotline. In most of the country, calls are routed through a national call center.

The hotline played a role in instigating HB-1136, as the high volume of referrals overwhelmed the state’s counseling agencies. The hope is that the additional funding from the surcharge will allow the agencies to expand their operations and meet this demand.