House Bill 1157, which goes into effect on January 1, 2008, contains numerous revisions to Colorado's foreclosure law (C.R.S. § 38-38-101, et seq.).  The overall intent of the revisions to the law is to modernize and simplify the foreclosure process in Colorado while providing owners with a more realistic opportunity to retain ownership of their property. The most significant changes relating to homeowners include:

• the expansion of time in which an owner may cure the default prior to the foreclosure sale; and
• the elimination of the owner's right to redeem their property following a foreclosure sale.   

The time between the commencement of foreclosure and the initial sale date (the “cure period”) will be extended from 45-60 days to 110-125 days – giving owners a longer period of time to cure the default leading to the institution of the foreclosure process.  The owner’s redemption period, currently 75 days, will be eliminated.   

Statistics compiled by Metro Denver Public Trustees indicate that very few owners are actually able to redeem their property after a foreclosure sale.  This is because redemption requires the owner to either payoff the loan in full or qualify for and close on a new loan when they have a foreclosure pending on their credit report.  Legislators hope that expansion of the cure period prior to sale will provide homeowners with sufficient time to work with their lender to cure the default (which is substantially less than the redemption amount), modify the terms of the loan, refinance the loan, or sell the property.  

The bill also limits the right to redeem of lien holders with 1) a lien recorded prior to the commencement of the foreclosure; 2) a lien recognized by statute, like a mechanic’s lien or an association’s lien; or 3) a lien created by a court judgment.  This change in the law is intended to protect homeowners from foreclosure investors who loan money to owners at exorbitant interest rates with the goal of ultimately either taking title to the property or stripping the equity from the home.  The owner, meanwhile, is left with a loan that he or she cannot realistically hope to repay, which many times results in the owner ending up right back in the foreclosure process. 

The changes to the foreclosure law also impact community associations in that every association needs to ensure that their recorded liens clearly include an address where the association wishes to receive notice of a foreclosure.  While association liens are statutory in Colorado, associations should still record notice of liens with an address for notice.  If an address is not included on recorded liens or recorded in the public record, associations will run the risk of not receiving notice of a foreclosure and any right the association has to redeem property may be extinguished.

Community E-ssentials - December 2007