COLORADO FORECLOSURE PROCESS – PART I
Colorado has a unique Public Trustee foreclosure system. Nearly all foreclosures (except in special circumstances) are administered through a public official, the Public Trustee. The Public Trustee oversees the process, sends out notices, and generally manages each foreclosure case that is filed in the county where the Public Trustee has been appointed (or in some instances elected).
A foreclosure generally has two purposes. First, the lender has made a loan to the borrower and taken the real estate as collateral for the loan by recording a deed of trust against the real estate. After the borrower defaults, the foreclosure process allows the lender to ultimately take title to the real property and then hopefully re-sell the real property to recover on the lender’s loan. Second, a proper foreclosure will eliminate any junior liens on the property and will transfer title to the foreclosing lender free and clear of all junior liens. It should be noted, however, that a foreclosure will not affect any liens that are senior to the deed of trust being foreclosed. The lender will take title to the real property through the foreclosure action subject to any senior liens.
The entire process – from sending the foreclosure request to the attorney to the very end – issuance of the Public Trustee’s Confirmation Deed – takes approximately five to six months. Depending upon whether the loan was for business purposes or for personal, family or household purposes, there may be certain notices and opportunities to cure or reinstate the loan which must be given to the borrower before the foreclosure is even filed with the Public Trustee. The attorney will check the loan documents, the applicable statutes and the lender’s records when the attorney receives the foreclosure request to make sure that all prerequisites have been met.
The attorney will involve a title company from the outset and will order a “foreclosure guarantee”. The foreclosure guarantee will identify all of the documents that have been recorded after the deed of trust that is being foreclosed. This information assists the attorney in identifying the persons who must be notified of the foreclosure action in order to achieve the stated purposes – transfer title to the lender and eliminate all junior liens.
NEXT UP: FILING THE FORECLOSURE WITH THE PUBLIC TRUSTEE