Colorado Foreclosure Laws

Foreclosure laws are the legal procedures by which a lender repossesses collateral for a loan which is in default. These laws are normally applied when one defaults on mortgage repayments. The lender therefore obtains legal right to sell off the property due to non payment by the owner.

Colorado is known a title theory sate. This means that property is held in trust by the lender until the underlying loan is fully paid. A deed of trust or mortgage document is used to secure title.

Non judicial foreclosure

The primary method of foreclosure in this state is non judicial foreclosure that does not involve court action. The deed of trust document contains a power of sale clause, which allows sale of property to satisfy the underlying loan if the borrower defaults on payments. A trustee, acting on behalf of the lender effectuates the auction by filing a document called election to foreclose. When dealing with a non judicial foreclosure, very strict notice requirements and legal documents that contain the power of sale language are required.

The notice requirements are:

• The state requires that a Notice of Election and Demand be filed with the Public Trustee in the country where property is located. After this notice is received, the Public Trustee must record the notice with the recorder not less than 10 business day after receiving the notice.
• The above notice must contain details on the default, the decision of the lender to foreclose quoting the power of sale clause in the deed of trust and date time and place of intended auction. The borrower is allowed to file intent to cure notice with the Public Trustee stating his intention to pay all outstanding loan arrears. Such payment must be received by noon on the day before the intended auction.
• The state requires that the auction take place 45-60 days after filing the Notice of Election Demand. A hearing may take place before the auction to ascertain that the foreclosure is legal and necessary. This hearing is called a Rule 120 hearing.

Judicial foreclosure

This state also allows for a judicial foreclosure where a ruling of foreclosure must be obtained from the court. This happens when the deed of trust does not contain the power of sale clause. A complaint is file in the court as well as a lis pendens document. This is a public notice document that indicates that a property has a suit pending on it.

Process period

A non-judicial foreclosure that is not contested takes approximately 60-70 days to effect depending on the time taken to process the required notices. This process may take longer if the borrower contests the auction in court seeking adjournment of auction or files for bankruptcy.

Redemption

The state of Colorado allows for a statutory right of redemption, giving the borrower 75 days after foreclosure to redeem property by paying all outstanding mortgage premiums and all fees incurred. The borrower must file an intent to redeem document not less than 15 days to the end of the redemption period after which the lender will provide a pay off number to redeem within 8 days, giving the borrower enough time to arrange for payment.

Deficiency judgment

The state does allow for a deficiency judgment when property is sold in an auction for less than the outstanding loan amount. The borrower may contest this by providing evidence that the trustee bid for less than the estimated value of the property during the auction.

Notice of Sale

The state requires that the notice of sale appear in the local newspaper circulating the county where property is located at least once a week for 5 weeks. The same notice must be mailed to the borrower not less than 20 days after the first appearance on the newspaper.

Foreclosure laws may change from time to time. It is therefore important to seek advice from a qualified attorney to ensure that you obtain up to date details on the laws of foreclosure in any state.