Explaining the Foreclosure Process in Colorado | Foreclosure Timeline and Laws -

Colorado has two types of foreclosure processes: judicial and non-judicial. Most lenders prefer the non-judicial or 'out-of-court' foreclosure process because it is faster, cheaper (because you won't be paying litigation costs), and requires minimum court involvement. The pre-foreclosure period lasts up to 120 days, and the total duration of foreclosure is 110 to 125 days, except for agricultural properties (215 to 230 days). Suppose you are experiencing financial hardship and fear that your property may have to go into foreclosure. In that case, this article will give you a brief idea about the foreclosure process in Colorado so you will know what your rights are and what you can expect during the process.

Pre-foreclosure period

The loan becomes DEFAULT when the payment remains due and unpaid for over 30 days. But, the foreclosure can only begin after the borrower defaults. FHA loans usually have a grace period of 120 days, known as the pre-foreclosure stage. The grace period for non-government loans varies widely depending on the lending agency. In some cases, it may be just 15-20 days. However, most lenders prefer waiting at least three months before beginning foreclosure.

What to expect during the pre-foreclosure stage

The lender will apply late charges to your payment as soon as the grace period for making the payment is over (10 or 15 days). The late charges are mentioned in the promissory note and mortgage statements. A late fee will be charged for each month until the foreclosure begins.

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Breach letter

When you default on payment, the lender will send you a 'breach letter,' also known as a pre-foreclosure notice, informing you about the foreclosure and how you can cure the default.

Property inspection

When the loan goes into default, a property inspection will be conducted to ensure that the home is occupied and well-maintained. As expected, the inspection will incur some cost, and the defaulter must pay for it.

Federal Mortgage Servicing Laws

This law mandates that 36 days after a loan becomes the default, the lender must contact the borrower and discuss loss mitigation options, such as loan modification, payment plans, forbearance, etc. However, suppose a borrower has already filed for bankruptcy or asked not to be contacted using the Fair Debt Collection Practices Act. In that case, the lender is expected not to act and wait for foreclosure.

Foreclosure process in Colorado

The foreclosure process officially begins after the loan defaults for over 120 days. As mentioned above, there are two types of foreclosure processes in Colorado. In judicial foreclosure, the lender has to file a lawsuit asking the court to allow a foreclosure sale. The court will ask the borrower to respond. If the borrower fails to respond, the lender wins, and the foreclosure begins. If the borrower chooses to defend, the court will examine and decide based on the evidence.

In the non-judicial foreclosure process in Colorado, the lender can follow the out-of-court foreclosure procedures without the court's involvement. This process is cheaper, faster, and beneficial for both parties. Here is the detailed process.

Notice of Election and Demand (NED)

To begin the foreclosure process, the lender has to submit a Notice of Election and Demand (NED) with the public trustee. The public trustee will conduct both judicial and non-judicial foreclosure processes in Colorado. Unlike many other states, a private trustee handles the non-judicial ones. It will record the NED with the County Clerk and Recorder within ten business days of receiving the NED from the lender's attorney.

Foreclosure Sale date

Once the public trustee has recorded the NED, it will set a date for the foreclosure sale/auction of the property, which has to be between 110 and 125 days after the recorded date of NED. If it is an agricultural property, the sale date can be between 215 and 230 days.

Notice about foreclosure

The public trustee will inform the borrower about the sale date as well as information about their Right to Cure. This is called a 'Combined Notice,' it is sent twice within 20 days of recording NED and 46 to 60 days before the sale date.

The trustee will mail the combined notice to the mailing list provided by the lender's attorney. It will also publish the combined foreclosure and sale notice in local newspapers five times over four consecutive weeks.

Rule 120 hearing

The lender will file for a Rule 120 hearing, an application requesting the court authorize the sale. The judge will then proceed with the hearing and grant or deny the sale. The borrower is notified about the hearing, and the notice is posted on the courthouse and the property being foreclosed. The borrower may file a response if they believe the loan is not in default.

Right to Cure

The borrower (the current property owner) may file the Notice of Intent to Cure to the Public Trustee at least 15 days before the sale date. Within a week, they will receive the 'Cure figures,' i.e., the amount of money that must be paid to reinstate the loan. The borrower must pay the cure amount by noon of the day before the day of the sale. If the borrower fails to pay, the trustee will continue with the sale.

Redemption period in Colorado

Some states allow foreclosed homeowners to redeem the home after the sale, but no such provision is available in Colorado. However, junior lienholders can express their intention to Redeem and pay the redemption amount within eight days of the sale.

Deficiency judgment/Excess proceeds

If the foreclosed property gets sold at a price that is less than the total debt owed, the borrower will still owe money to the lender even after he/she has lost his home. This is known as a deficiency judgment. Similarly, suppose the sale price exceeds the debt. In that case, the borrower will be entitled to surplus money, known as excess proceeds.

Foreclosure process in Colorado FAQS

How long can the homeowner of the foreclosed property stay in it?

You can stay until the possession goes to a new owner. After that, you must move out, or the purchaser may initiate an eviction lawsuit.

How can you stop foreclosure in Colorado?

Reinstate the loan: You can 'cure' the default by paying all missed payments, late fees, and other costs. You can file a notice of intent to cure 15 days before the date of sale, and you will have to pay the amount until noon the day before the foreclosure.

Redeem the property: You can pay the total loan amount and all other costs before the foreclosure sale. Remember that homeowners can't redeem the property after the foreclosure sale in Colorado.

File for bankruptcy: This can give you temporary relief. You can talk to a bankruptcy attorney to find out how it can help.

What is the Servicemembers Civil Relief Act, and how can it protect you against foreclosure?

Servicemembers Civil Relief Act provides certain protections against foreclosure. If you are an active military person, inform the court when you are intimated about the Rule 120 hearing. The court will decide the benefits you may receive.

In conclusion

Understanding the foreclosure process in Colorado is crucial for homeowners facing financial difficulties. Remember that there are two foreclosure processes: judicial and non-judicial. The latter is more common due to its efficiency and lower cost. The pre-foreclosure period allows borrowers to explore loss mitigation options, and you must be aware of your rights during this time. While Colorado does not offer a redemption period for homeowners, it does provide options to cure the default and potentially halt foreclosure proceedings. If you face foreclosure, seek professional guidance to ensure you are well informed about your rights and the available resources.

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