Colorado Foreclosure Laws and Procedures

Learn how the Colorado foreclosure process works.

By , Attorney (University of Denver Sturm College of Law)

Before the foreclosure crisis, federal and state laws regulating mortgage servicers and foreclosure procedures were relatively limited and tended to favor the foreclosing lender. However, federal and state laws now heavily regulate loan servicing and foreclosure processes. And most of the laws give protections to borrowers.

Servicers generally have to provide borrowers with loss mitigation opportunities, account for each foreclosure step, and strictly comply with foreclosure laws. Also, most people who take out a loan to buy a residential property in Colorado sign a promissory note and a deed of trust, which is like a mortgage. These documents give homeowners some contractual rights in addition to federal and state legal protections.

So, don't get caught off guard if you're a Colorado homeowner behind in mortgage payments. Learn about each step in the Colorado foreclosure process, from missing your first payment to a foreclosure sale.

What Are My Rights During Foreclosure in Colorado?

In a Colorado foreclosure, you'll most likely get the right to:

  • a preforeclosure notice
  • apply for loss mitigation
  • receive certain foreclosure notices
  • get current on the loan and stop the foreclosure sale
  • attend a court hearing
  • receive special protections if you're in the military
  • pay off the loan to prevent a foreclosure sale
  • file for bankruptcy, and
  • get any excess money after a foreclosure sale.

Once you understand the Colorado foreclosure process and your rights, you can make the most of your situation and, hopefully, work out a way to save your home or at least get through the process with as little anxiety as possible.

What Is Preforeclosure?

The period after you fall behind in payments, but before a foreclosure officially starts, is generally called the "preforeclosure" stage. (Sometimes, people refer to the period before a foreclosure sale actually happens as "preforeclosure," too.)

During this time, the servicer can charge you various fees, like late charges and inspection fees, and, in most cases, must inform you about ways to avoid foreclosure and send you a preforeclosure notice called a "breach letter."

Fees the Servicer Can Charge During Preforeclosure

If you miss a payment, most loans include a ten or fifteen-day grace period, after which time the servicer will assess a late fee. Each month you miss a payment, the servicer will charge this fee. Look at the promissory note you signed to find out your loan's late charge amount and grace period. You can also find this information on your monthly mortgage statement.

Also, most Colorado deeds of trust allow the lender (or the current loan holder, referred to as the "lender" in this article) to take necessary steps to protect its interest in the property. Property inspections are performed to ensure that the home is occupied and appropriately maintained. Inspections, which are generally drive-by, are usually ordered automatically once the loan goes into default and typically cost around $10 or $15.

Other fees the servicer might charge include those for broker's price opinions, which are like appraisals, and property preservation costs, such as yard maintenance or winterizing an abandoned home.

Federal Mortgage Servicing Laws and Foreclosure Protections

Under federal mortgage servicing laws, the servicer must contact, or attempt to contact, you by phone to discuss loss mitigation options, like a loan modification, forbearance, or payment plan, no later than 36 days after you miss a payment and again within 36 days after each following delinquency. (12 C.F.R. § 1024.39.)

No later than 45 days after missing a payment, the servicer has to inform you in writing about loss mitigation options that might be available and appoint personnel to help you try to work out a way to avoid foreclosure. A few exceptions are in place for some of these requirements, though, like if you've filed for bankruptcy or asked the servicer not to contact you pursuant to the Fair Debt Collection Practices Act. (12 C.F.R. § 1024.39, 12 C.F.R. § 1024.40).

Federal mortgage servicing laws also prohibit dual tracking (pursuing a foreclosure while a complete loss mitigation application is pending).

What Is a Breach Letter?

Many Colorado deeds of trust have a provision that requires the lender to send a notice, commonly called a "breach letter," informing you that the loan is in default before the lender can accelerate the loan. The breach letter gives you a chance to cure the default and avoid foreclosure.

Homeowner Rights Under Colorado Law

Colorado law provides two key protections for homeowners seeking a way to avoid a foreclosure: Dual tracking is prohibited (Colo. Rev. Stat. § 38-38-103.2), and the servicer has to appoint a single point of contact for the borrower (Colo. Rev. Stat. § 38-38-103.1).

These protections are similar to those that federal law provides.

No Dual Tracking Under Colorado Law

Colorado law gives the public trustee (the party that administers Colorado foreclosures) the ability to stop a foreclosure sale from happening when a borrower:

  • has submitted a complete loss mitigation application or
  • has been offered and accepted a loss mitigation option and is complying with its provisions.

To stop the foreclosure sale, you must present to the public trustee (no later than 14 calendar days before the sale date):

  • a written notification from the servicer showing that, at least 37 days before the sale date, the servicer received a complete loss mitigation application from you, or
  • evidence that you were offered and have accepted a loss mitigation option, like a loan modification. You also have to be in compliance with the terms of the loss mitigation agreement.

The public trustee will then contact the attorney for the lender or servicer (or the lender or servicer, if they don't have an attorney) and ask about the status of loss mitigation. The public trustee will postpone the sale until a response is received.

The public trustee will postpone the sale if the lender or servicer acknowledges that loss mitigation is pending. The lender or servicer will eventually cancel the foreclosure as long as you comply with the terms of the agreement.

On the other hand, if the lender or servicer responds that no loss mitigation is pending, or you're not complying with the terms of a loss mitigation agreement, the public trustee will continue with the foreclosure sale. If the lender or servicer incorrectly informs the public trustee that it isn't dual tracking and the trustee decides to proceed with the sale, you should immediately contact an attorney to determine your next steps.

Single Point of Contact Requirement

Colorado law requires that, no later than the 45th day of a borrower's delinquency, the servicer must establish a single point of contact for the borrower to talk to about foreclosure matters, including:

  • available loss mitigation options
  • actions the borrower must take to be evaluated for loss mitigation options
  • the circumstances under which the servicer may make a referral to foreclosure
  • the status of any loss mitigation application
  • applicable loss mitigation deadlines, and
  • actions the borrower must take to appeal a loan modification denial.

One important thing to note is that if the servicer complies with federal mortgage servicing laws, it is considered in compliance with Colorado law.

Applicability of the State Law

The protections of Colorado's law apply to mortgage loans for residential properties that are:

  • either a single-family or multi-family dwelling (with no more than four units), and
  • used by the borrower as their primary residence.

Some smaller servicers are exempt from Colorado's dual tracking and single point of contact requirements.

When Can a Colorado Foreclosure Start?

Under federal law, the servicer usually can't officially begin a foreclosure until you're more than 120 days past due on payments, subject to a few exceptions. (12 C.F.R. § 1024.41). This 120-day period provides most homeowners ample opportunity to submit a loss mitigation application to the servicer.

What Is the Foreclosure Process in Colorado?

If you default on your mortgage payments in Colorado, the lender may foreclose using a judicial or nonjudicial method.

How Judicial Foreclosures Work

A judicial foreclosure begins when the lender files a lawsuit asking a court for an order allowing a foreclosure sale. If you don't respond with a written answer, the lender will automatically win the case.

But if you choose to defend the foreclosure lawsuit, the court will review the evidence and determine the winner. If the lender wins, the judge will enter a judgment and order your home sold at auction.

How Nonjudicial Foreclosures Work

If the lender chooses a nonjudicial foreclosure, it must complete the out-of-court procedures described in the state laws. However, Colorado nonjudicial foreclosures have a minimal amount of court involvement. After completing the required steps, the lender can sell the home at a foreclosure sale.

When available, most lenders opt to use the nonjudicial process because it's quicker and cheaper than litigating the matter in court.

Which Is the Most Common Foreclosure Process in Colorado?

Again, most residential foreclosures in Colorado are nonjudicial. Here's how the process works.

Preforeclosure Notice Under Colorado State Law

In most cases, 30 days before filing the Notice of Election and Demand (see below), and at least 30 days after the default, the lender must mail the borrower a notice with information about:

  • the state's foreclosure hotline
  • the direct telephone number of the lender's loss mitigation representative or department, and
  • a statement that it's illegal for any person acting as a foreclosure consultant to charge an upfront fee or deposit for services related to the foreclosure. (Colo. Rev. Stat. § 38-38-102.5).

How Colorado Foreclosures Begin

The foreclosure process begins when the lender files a Notice of Election and Demand (NED) with the public trustee, who then records it with the county clerk and recorder. (Colo. Rev. Stat. § 38-38-101). Unlike other states that allow a private trustee to conduct nonjudicial foreclosures, a public trustee handles Colorado nonjudicial foreclosures.

The public trustee then sets a foreclosure sale date, which can't be less than 110 calendar days or more than 125 calendar days from when the NED is recorded. (Though, when it comes to agricultural properties, the sale can't be less than 215 or more than 230 calendar days from the NED's recording date.) (Colo. Rev. Stat. § 38-38-108).

Notice About the Foreclosure

The public trustee then mails the borrower what's called a "combined" notice at two separate times:

  • The first time will be no more than 20 calendar days after the recording of the NED.
  • The second is no more than 60 calendar days nor less than 45 calendar days before the first scheduled sale date.

This notice includes specific information, like the date and place of sale and the right to cure. The trustee publishes this notice in a newspaper, as well. (Colo. Rev. Stat. § 38-38-103).

The Rule 120 Process

Even though Colorado's most common foreclosure process is considered nonjudicial, the court plays a minor part in the procedure. Rule 120 of the Colorado Rules of Civil Procedure requires the foreclosing lender to ask a court to authorize the foreclosure sale as part of the nonjudicial process. At the Rule 120 hearing, the court determines if the lender has the right to foreclose and sell the property.

So, as part of the nonjudicial process, the lender's lawyer files a motion asking the court for an order authorizing the sale. After the lender files the motion, the clerk sets a response deadline.

The lender then serves a notice to the borrower no less than 14 days before the response deadline. This notice contains information about the right to file and serve a response. The notice is also posted at the courthouse and on the property that's being foreclosed.

Scope of the Response and Hearing

The scope of the borrower's response and a subsequent hearing is limited to four particular issues—and that's it.

  • Are you in default? If you fail to comply with the terms of the promissory note or deed of trust that you signed when taking out your home loan, you're considered in default. If you don't make the payments, for example, then you're in default. But if the lender starts a foreclosure and you're not actually violating the terms of your loan contract, you may raise this issue at the Rule 120 hearing.
  • Are you entitled to protections under the Servicemembers Civil Relief Act? If you're an active military servicemember, you're entitled to certain protections against foreclosure under a federal law called the Servicemembers Civil Relief Act. If you're in the military, you should let the court know.
  • Is the foreclosing lender the real party in interest? At the Rule 120 hearing, the court may consider whether the foreclosing party is the real party in interest. That is, does it have the right to foreclose (called "standing")? An entity that doesn't own the loan doesn't have standing to initiate a foreclosure.
  • Should the status of any request for a loan modification stop the foreclosure? The court may also consider whether the status of any request for a loan modification agreement bars a foreclosure sale as a matter of law. So, you might be able to successfully argue at a Rule 120 hearing that the servicer violated the terms of an oral or written loan modification agreement. For example, say the lender agreed to modify your loan if you made three on-time trial payments. You made the payments, but the lender didn't modify the loan. You may raise this issue as part of the Rule 120 process.

The court won't consider defenses other than something that falls under one of these four categories, though. If you want to challenge the foreclosure on other grounds, like the lender committed fraud in originating the mortgage, you'll have to file a separate civil case.

If you don't file a valid response to the notice of hearing or file your response too late, the judge may cancel the hearing and sign the order authorizing a foreclosure sale of your home.

How Do Colorado Foreclosure Sales Work?

The sale is an auction, which is open to the public. At the sale, the lender usually makes a credit bid. The lender can bid up to the total amount owed, including fees and costs, or it may bid less.

In some states, including Colorado, when the lender is the high bidder at the sale but bids less than the total debt, it can get a deficiency judgment against the borrower. The property becomes "Real Estate Owned" (REO) if the lender is the highest bidder.

But if a bidder, say a third party, is the highest bidder and offers more than you owe, and the sale results in excess proceeds—that is, money over and above what's needed to pay off all the liens on your property—you're entitled to that surplus money.

How Long Do You Have to Move Out After Foreclosure in Colorado?

After a Colorado foreclosure, the purchaser must make a demand for possession. If you don't vacate (leave), the purchaser can initiate an eviction lawsuit.

What Are the Options Available for Borrowers During Foreclosure in Colorado?

A few potential ways to stop a foreclosure and keep your home include reinstating the loan, redeeming the property before the sale, or filing for bankruptcy. Working out a loss mitigation option, like a loan modification, will also stop a foreclosure.

Or you might be able to work out a short sale or deed in lieu of foreclosure and avoid foreclosure. But you'll have to give up your home with a short sale or deed in lieu of foreclosure transaction.

Reinstating the Loan

Under Colorado law, the borrower may prevent a nonjudicial foreclosure sale by "curing" the default, which means bringing the account up to date by paying all missed payments plus fees and costs. This procedure is called "reinstating" the loan.

To reinstate the loan, no later than 15 calendar days before the sale, you have to file a notice of intent to cure with the trustee. You'll get a cure statement that details the amount you'll have to pay to cure the default and stop the foreclosure, and you'll have until 12:00 noon on the day before the foreclosure sale to reinstate. (Colo. Rev. Stat. § 38-38-104).

Does Colorado Have a Redemption Period After a Foreclosure Sale?

One way to stop a foreclosure is by "redeeming" the property. To redeem, you must pay off the full loan amount before the foreclosure sale.

Some states also provide foreclosed borrowers a redemption period after the foreclosure sale, during which they can buy back the home. In Colorado, some lienholders can redeem the property after the sale, but not a foreclosed homeowner. (Colo. Rev. Stat. § 38-38-302).

Filing for Bankruptcy

If you're facing a foreclosure, bankruptcy might help. If a foreclosure sale is scheduled to occur in the next day or so, the best way to stop the sale immediately is by filing for bankruptcy.

Once you file for bankruptcy, something called an "automatic stay" goes into effect. The stay functions as an injunction, prohibiting the lender from foreclosing on your home or trying to collect its debt, at least temporarily.

In many cases, filing for Chapter 7 bankruptcy can delay the foreclosure by a matter of months. Or, if you want to save your home, filing for Chapter 13 bankruptcy might be the answer. To find out the options available, speak with a local bankruptcy attorney.

Does Colorado Allow Deficiency Judgments?

The borrower's total mortgage debt sometimes exceeds the foreclosure sale price in a foreclosure. The difference between the total debt and the sale price is called a "deficiency." For example, say the total debt owed is $500,000, but the home sells for $450,000 at the foreclosure sale. The deficiency is $50,000.

In some states, the lender can seek a personal judgment against the borrower to recover the deficiency. Generally, once the lender gets a deficiency judgment, the lender may collect this amount—in our example, $50,000—from the borrower.

Colorado law allows deficiency judgments.

What Is the Statute of Limitations for a Deficiency Judgment in Colorado?

In Colorado, the lender has six years to file a lawsuit against you to get a deficiency judgment. (Colo. Rev. Stat. § 4-3-118).

Colorado Deficiency Judgment Laws

Colorado law requires that the lender bid at least a good-faith estimate of the property's fair market value (less the amount of unpaid real property taxes, senior liens, and sale costs) at the foreclosure sale. (Colo. Rev. Stat. §38-38-106).

A court finding that the bid was inadequate won't void the foreclosure sale or prohibit a deficiency judgment. But if you raise this issue as a defense, the court will consider it when determining the deficiency amount. (Bank of America v. Kosovich, 878 P.2d 65 (Colo. App. 1994), Colo. Rev. Stat. § 38-38-106).

What Are the Potential Consequences of Foreclosure?

A foreclosure could result in serious consequences, like lower credit scores, a deficiency judgment (as discussed above), or tax consequences.

More Foreclosure Information

For more information on federal mortgage servicing laws, as well as foreclosure relief options, go to the Consumer Financial Protection Bureau (CFPB) website.

Read More Articles

Get tips on what to do—and what not to do—if you're facing a foreclosure.

Find out if foreclosures are on the rise.

Getting Help

If you have questions about Colorado's foreclosure process or want to learn about potential defenses to a foreclosure and possibly fight the foreclosure in court, consider talking to a foreclosure attorney. Talking to a HUD-approved housing counselor about different loss mitigation options is also a good idea.

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