In part one of The Real Estate Foreclosure Process, we began discussing the foreclosure process in Colorado. The process for hard money lenders starts with the issuance of a demand letter, then the foreclosure is filed with the Public Trustee, and after that the borrower and all other creditors are notified. This article will rejoin the process at step four: The Rule 120 Hearing.

• Step Four : The Rule 120 Hearing – Colorado law requires that the Lender schedule a hearing in District Court in the county in which the property is located.  The purpose of this hearing is to determine if there is, in fact, a default and if the owner of the property is a member of the armed forces.  Other issues concerning borrower’s claims against the lender are typically not able to be heard in this hearing and the borrower would have to bring a separate case against the lender to raise these concerns.  The borrower is notified of the hearing and may file an answer to Lender’s claim of a default through their counsel or on their own.

• Step Five:  Receivership – If  the property in foreclosure is an improved income producing property the Lender may ask District Court to appoint a Receiver.  The Receiver is an agent of the court and takes over management and control of the property. The Receiver will collect the rental income from the property and has wide authority to maintain the property in good condition and can even rent vacant space.  The borrower must surrender control of the property to the Receiver when this order is entered.

• Step Six: The Cure Period – The borrower may “cure” the default for ___ days after the filing of the Notice of Election and Demand (see part I).  To cure a default means that the borrower must pay the Lender all past due interest rate (including default interest and other charges) as well as pay the Lender’s legal and other costs incurred in the foreclosure process.  Once the Borrower pays these fees and costs the loan is taken out of default and the Public Trustee cancels the foreclosure.

• Step Seven: Transfer of Title to Lender – After the ____ day “cure” period ends, assuming the Borrower has not cured the default the Public Trustee issues a
  “Certificate of Purchase” to the Lender which is the next to final step in transferring Borrower’s title to the property to the Lender.  There is an additional ___ day period during which any junior lienor (i.e. a second mortgage holder or anyone who has a recorded interest in the property that was recorded after the first deed of trust) may “redeem” the property by paying off the first mortgage Lender in full.  This right does not extend to the borrower.   Once this ___ day redemption period expires the Public Trustee issues what is called a “Confirmation Deed” which officially transfers ownership of the property to the Lender.  The Borrower loses all rights to the property once the Conformation Deed is recorded and this brings the foreclosure process to its conclusion.

This posting is not intended to provide legal advice to anyone.  If you are the subject of a foreclosure Montegra urges you to retain your own attorney and follow their advice on the best way to deal with the default and/or foreclosure.  These postings are only meant to give a general overview of the foreclosure process in Colorado and are not written by an attorney.

This blog was written by Bob Amter, President of Montegra Capital Resources, LTD., a Colorado hard money lender.  [google_authorship] has been in the private capital lending business for 41 consecutive years.