If you’re a homeowner in Colorado and you're behind in your mortgage payments, it’s a good idea to learn how a foreclosure works. In this article, you’ll learn about each step in a Colorado foreclosure, as well as get useful information about both federal laws and state laws that protect homeowners during the process.
Federal law usually prevents the servicer (on behalf of the lender) from initiating a foreclosure until the loan obligation is over 120 days delinquent. (12 C.F.R. § 1024.41). (To learn more about the federal law that delays the beginning of a foreclosure for 120 days, see How Soon Can Foreclosure Begin?)
In most cases, 30 days before filing the Notice of Election and Demand (see below), and at least 30 days after the default in payments, the lender must mail the borrower a notice with information about:
Foreclosures in the state of Colorado are considered “nonjudicial,” which means the foreclosure takes place mostly without court oversight. Foreclosures can also be judicial, which means the case goes through state court. (Learn the basics about judicial and nonjudicial foreclosures.)
Because the majority of foreclosures in Colorado are nonjudicial, those procedures are summarized below.
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 a nonjudicial foreclosure, in Colorado, an official known as the public trustee handles the process.)
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).
The public trustee then mails the borrower what’s called a “combined” notice twice: 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 information about the right to cure or redeem (see below). The trustee publishes this notice in a newspaper, as well. (Colo. Rev. Stat. § 38-38-103).
Even though the most common type of foreclosure process in Colorado is considered nonjudicial, the court plays a minor part in the procedure. As part of the process, the lender’s attorney files a motion under Rule 120 of the Colorado Rules of Civil Procedure asking the court for an order that authorizes the foreclosure sale. After the lender files the motion, the clerk sets a deadline for responses. The lender then serves a notice to the borrower about the right to file and serve a reply no less than 14 days before the response deadline. A borrower's response is limited to four issues:
If the borrower doesn’t respond—most don’t—the court typically cancels the hearing and enters an order that allows the foreclosure sale. If the borrower does respond by raising a potentially legitimate defense, the court will set a hearing, called a "Rule 120 hearing." (To learn more, read How Colorado Rule 120 Hearings Work.)
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).
If the total mortgage debt is more than the foreclosure sale price, the difference is called a “deficiency.” Some states—including Colorado—allow the lender to get a personal judgment (called a “deficiency judgment”) against the borrower for this amount.
In Colorado, the lender has six years to file a separate lawsuit against you to get a deficiency judgment. (Colo. Rev. Stat § 4-3-118). (To learn more about deficiency judgments after a Colorado foreclosure, see Will I Still Owe the Lender Money After a Colorado Foreclosure?)
Many states have a law that allows a foreclosed homeowner to “redeem” (buy back) the home after the foreclosure sale. In Colorado, some lienholders get the right to redeem the property after the sale, but not a foreclosed homeowner. (Colo. Rev. Stat. § 38-38-302).
Federal and state laws establish a structured foreclosure process and timeline. But mistakes that violate the law are common in foreclosures. If you think your lender or servicer broke the law in the foreclosure process or you want to find out about different ways to fight a foreclosure, consider contacting a local foreclosure attorney.
It’s also a good idea to contact a HUD-approved housing counselor if you want to learn about different loss mitigation options.