Foreclosure in Colorado

How a Colorado foreclosure works, step by step

1. Generally, the legal foreclosure process can't start until you're at least 120 days behind.
2. At least 30 days after a default, and at least 30 days before starting the foreclosure, your lender must mail you a notice. It gives the phone number of the Colorado foreclosure hotline and a direct number for the lender's loss mitigation staff. It also says it's illegal for a foreclosure consultant to charge you an up-front fee or deposit.
3. The lender files a notice of election and demand, with other papers, with your county's public trustee. If the filing is complete, the public trustee records the notice with the county clerk and recorder within 10 business days.
4. No more than 20 calendar days after recording, the public trustee mails a combined notice to the people on the foreclosure's mailing list.
5. For a home, the lender must post notice of the Rule 120 court hearing on the property at least 14 days before the hearing. You have until 7 days before the hearing to file a response with the court. If you don't, the court enters the order authorizing the sale, even if you show up.
6. Between 60 and 45 days before the first sale date, the public trustee mails the combined notice again, and publication of the notice begins, once a week for five weeks in a row.
7. To catch up, file a written notice of intent to cure with the public trustee at least 15 calendar days before the sale. Then pay what's due to the public trustee by 12 noon on the day before the sale.
8. The first sale date falls 110 to 125 days after the notice of election and demand was recorded, for property that isn't agricultural. The public trustee holds the sale at the courthouse or a county office named in the notice, or online.
9. After the sale, junior lienholders have 8 business days to file a notice of intent to redeem. If there are no redemption periods, title passes to the holder of the certificate of purchase at the close of business 8 business days after the sale.
10. You don't have to move out until after the home is sold. If you don't leave, the new owner can file an eviction case to remove you.

Working it out with your servicer

Your servicer must set up a single point of contact for you by the 45th day you're behind. Small servicers are exempt: those with 5,000 or fewer loans, all held by them or an affiliate as creditor or assignee.

Federal rules add a backstop: a complete application that reaches your servicer more than 37 days before a sale must be acted on within 30 days. If your servicer has confirmed in writing that it got your complete application at least 37 days before the sale, or that you accepted a workout, bring that notice to the public trustee at least 14 calendar days before the sale. The public trustee must then continue the sale until the servicer or its attorney answers the trustee's inquiry.

If you think a servicer broke these rules, you can complain to the Colorado attorney general, the CFPB or both, but filing a complaint won't halt the foreclosure process.

Catching up before the sale: the intent to cure

You can bring the loan current by filing a written notice of intent to cure with the public trustee no later than 15 calendar days before the sale. The public trustee then asks your lender for a cure statement and sends it to you.

You must pay what's due by 12 noon on the day before the sale. That doesn't include principal that's due only because the lender sped up the loan, called acceleration.

If the sale is moved to a later date, the deadline to file your intent to cure may move too. If you pay on time, the foreclosure is withdrawn.

Your Rule 120 court hearing

A public trustee sale held without a proper court order authorizing it is invalid. The court's review is narrow: it decides whether there's a reasonable probability that a default happened and whether an order authorizing the sale is proper.

Any interested person, most often the homeowner, can respond on court form JDF 621. File it no later than 7 days before the hearing. If you or anyone on the loan is in the military now, say so in your response.

If the judge orders the sale, the public trustee in your county may sell your home at auction.

The public trustee sale

You still own the home, with an owner's rights and duties, until the sale. In Jefferson County, the public trustee sends its second notice about 60 days before the sale, and no notices after that.

The sale can be continued, but generally not past 12 months from the original date in the combined notice. The public trustee can't continue the sale just because you, the borrower, ask.

The sale is held at a courthouse, or a building with the county clerk and recorder's or public trustee's office, as named in the combined notice, or online. Jefferson County, for example, holds its sales online through GovEase.

How long it takes

Foreclosure generally can't legally start until you're at least 120 days behind. Once it starts, how long you have until the sale depends on your state.

For FHA loans, HUD's time frame runs from the first legal action until the lender has clear title to the home and possession of it. In Colorado, that's 12 months, and the first legal action is filing the foreclosure documents with the public trustee.

Under state law, the first sale date is 110 to 125 days after the notice of election and demand is recorded, for property that isn't agricultural. Continuances can push it later, but generally not more than 12 months past the original date.

These are official markers, not a forecast. Your case can move faster or slower, so don't count on extra time.

After the sale: shortfall, extra money and redemption

A deficiency bid is a lender bid for less than what's owed. The lender can then choose to sue you, or anyone else who signed the note, for the difference. The state courts put it plainly: you may still owe the lender if the auction doesn't bring in enough to pay off the loan.

The lender must bid at least its good-faith estimate of the home's fair market value, minus unpaid property taxes, senior liens and the estimated reasonable costs of holding, marketing and selling it. If it bids less, the sale still stands, but anyone sued for a deficiency can raise that as a defense.

If the home sells for more than is owed, once the redemption periods end, the extra goes to junior lienholders in order of their recording priority, and anything left after that goes to the borrower. The public trustee must mail you a notice about it no later than 30 days after all redemption periods end. Unclaimed overbids of $25 or more go to the state treasurer if no one claims them within two years of the sale.

An agreement to pay someone to recover your overbid from the public trustee can't be enforced, and talking someone into one, or trying to, is a class 2 misdemeanor. Before you sign anything or pay a fee to a finder, check with the public trustee to see if your name is on its list.

For cases under the law in effect since January 1, 2008, you, the owner, have no redemption period after the sale. Only junior lienholders can redeem, and they must file a notice of intent to redeem within 8 business days after the sale.

Protections when you sell, lease or get offers

• The Colorado Foreclosure Protection Act covers foreclosure consultants: people who, for pay, offer services such as stopping or postponing a foreclosure sale. A consultant can't take any pay until every promised service is fully done, and can't acquire an interest in your property. You can cancel a consulting contract at any time. Breaking these rules is a misdemeanor, with up to one year in county jail, a fine of up to $25,000, or both.
• The act also covers equity purchasers: anyone, other than a person buying it to live in, who takes title to a home in foreclosure. That means a home you live in as your main residence, with a mortgage that's in foreclosure or that the buyer knows is at least 30 days behind. The written contract must state when you hand over possession, the terms of any lease, and any option to buy the home back. You can cancel until midnight of the third business day after you sign, or until noon the day before the foreclosure sale, whichever comes first. Until then, the buyer can't take a deed from you or get you to sign one. The buyer can't make untrue or misleading statements about your home's value or what you'd get after a foreclosure sale. Some violations are misdemeanors.
• If you deed the home to a buyer but keep an option to buy it back, the deal is allowed only if every listed condition is met. You must get a 30-day right to cure any default under the buy-back contract, usable at least three times, and the buyer must take over or pay off the loan in foreclosure. A buy-back price exceeding 25 percent of the buyer's purchase price is presumed unconscionable.
• In a short sale where the buyer plans to resell your home to someone else, the buyer must tell you and your lender the terms of that resale, including its price.
• In a contract for deed, the parties must name the county public trustee as escrow agent for property tax payments. The seller must file a notice of the contract with the county treasurer within 90 days. If either step is skipped, the buyer can void the contract.
• It's a crime called equity skimming to knowingly take an interest in a home whose loan is behind, or falls behind within 18 months, and then not use the rent to pay the loan first. Equity skimming is a class 5 felony. The state's Division of Real Estate reminds owners that signing over the title is separate from your duty to make your mortgage payments.

Several of these touch how I buy. The equity purchaser rules above cover buyers who take title while a home is in foreclosure, which touches a cash offer, taking over payments and seller financing, and they include your right to cancel. The equity skimming law also touches taking over payments, and the contract for deed rule touches seller financing set up that way. With a lease option or a novation, the title stays in your name until the home is sold. And don't stop talking to your lender while you weigh any offer, including mine.

Free help in Colorado

• CHFA: foreclosure prevention. CHFA helps homeowners at risk of foreclosure connect with HUD-approved housing counselors.
• Colorado Attorney General: resource guide. Colorado Housing Connects offers a hotline and other help connecting distressed homeowners with free HUD-approved housing counselors.
• Colorado Judicial Branch: residential foreclosures. Any interested person, most often the homeowner, can answer a Rule 120 notice on form JDF 621.
• Colorado Division of Real Estate: equity skimming. How to spot an equity skimming scam.
• CFPB: find a housing counselor. Search HUD-approved counseling agencies in Colorado.