Even though it sounds counterintuitive, homeowners facing a Colorado nonjudicial (out of court) foreclosure have the right to a hearing before a judge. But the scope of the hearing is quite limited—and you need to understand what you can and can’t argue.
Read on to learn what matters you can raise at a Rule 120 hearing and how to go about it.
Foreclosures in Colorado are usually nonjudicial, which means the lender has to follow a series of out-of-court steps to foreclose a home. In Colorado though—unlike other states that use this process—nonjudicial foreclosures are unique in that a public trustee, rather than a private foreclosure trustee, handles the process. Also, even though the process is considered nonjudicial, a court plays a minor role. (To learn the steps in a typical Colorado foreclosure, read our Summary of Colorado’s Foreclosure Laws.)
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 bank has the right to foreclose on the property and sell it.
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 deadline for responses. 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 scope of the borrower's response, and a subsequent hearing, is limited to four particular issues—and that’s it. Those issues are: whether the borrower was in default, whether the borrower is in the military, whether the moving party is the real party in interest, and whether the status of a loan modification agreement should prevent a foreclosure sale.
Here’s some more information about each of these issues.
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. (To learn about the different ways to default, see What Does It Mean to “Default” on a Mortgage Loan?)
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.
At the Rule 120 hearing, the court may consider whether the foreclosing party has the right to foreclose—called “standing.” An entity that doesn’t own the loan doesn’t have standing to initiate a 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. This means you might be able to successfully argue in 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 bank 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 you file your response too late—the judge may cancel the hearing and sign the order authorizing a foreclosure sale of your home.
If you want to find out whether you have a defense that can be raised at a Rule 120 hearing, need help filing a response to a notice of hearing, or want representation at a Rule 120 hearing, contact a local foreclosure lawyer. A foreclosure lawyer can advise you about all potential defenses you might have to the foreclosure and let you know whether you should consider filing your own lawsuit to fight the action based on different arguments. If you can’t afford an attorney, you might be eligible to get help from a legal aid organization.
To get tips on what to do—and what not do—if you’re facing a foreclosure, see Foreclosure Do’s and Don’ts.