FORECLOSURE
The foreclosure process in Colorado is quite different than in many other states because Colorado is a Deed Of Trust state, allowing for a non-judicial foreclosure process. This allows the lender to pursue foreclosure without the need of going to court.
Each county has a Public Trustee, appointed by the governor. The Trustee acts as an impartial party in the foreclosure process.
A ‘Power Of Sale Clause’ is inserted into the deed of trust or mortgage. This is the clause in which the borrower pre-authorizes the sale of the property to pay off the balance of the loan if the buyer is in default.
The foreclosure process begins when the attorney representing the lender files the required documents with the office of the Public Trustee of the county in which the property is located. The Public Trustee then determines a Sale Date, 115-125 days for non-agricultural property, and files a ‘Notice Of Election and Demand’ (NED) with the county clerk and recorder. This is the official start of the foreclosure process.
Once recorded, the notice must be published in a newspaper of general circulation within the county where the property is located for a period of five (5) consecutive weeks.
The property owner may halt foreclosure proceedings by filing their ‘Intent to Cure’ with the Public Trustee at least fifteen (15) days prior to the foreclosure sale and then paying the outstanding amounts to bring the loan current by noon of the day before the sale.
The lender has the option of filing for a Deficiency Judgement against the owner if the sale recovers less than what was owed on the loan. If the lender does not file for deficiency, then the owner could still be liable for taxes on the amount forgiven by the lender. Much of this burden was relieved by the Mortgage Forgiveness Debt Relief Act of 2007.
Note. MFDRA expired on January 1, 2014. There was some talk that Congress would extend it but it has not happened as of 4-26-14. It is as yet undetermined what effect this will have. 'Distressed Homeowners' needing a Short Sale will not be liable to pay taxes on the deficiency, but it is not clear just what is meant by 'Distressed.' Expiration of the act could potentially have a serious negative effect on Short Sales.
For more information on this subject:
Foreclosure Process & Time Frames
Foreclosure Law
Foreclosure Hotline
Short Sales
Note: For informational purposes only. Not intended as legal advice. To be sure of accuracy or If you are unsure how you are affected, it is recommended that you consult an attorney experienced in Colorado Foreclosure and Tax law.
