For most families, their home is their biggest investment – and their largest debt. When the borrower can no longer keep up with their payments, the bank has to foreclose the mortgage and the borrower loses their home. When this happens, the aid of an experienced attorney is essential to getting things back on track or limiting the damage so that you can move on with your life.
Most mortgage holders will not start the process of foreclosure until the borrower is 3-6 months behind on their payments. Once they reach this point, a Notice of Election and Demand (NED) will be filed with the Public Trustee in the county where the property is located and a copy will be mailed to the homeowner. The NED kicks off the formal foreclosure process which will take 5-6 months to get to the foreclosure auction. At the foreclosure auction, the property is sold to the highest bidder. In most cases, the high bidder is the bank that holds the mortgage.
At any time before the foreclosure sale, the homeowner has the right to cure the mortgage. If the homeowner can pay everything that is owed to bring the loan current (including late fees and foreclosure costs), the loan will be reinstated and the foreclosure will be cancelled.
In Colorado, a borrower can stay in their house for at least 8-12 months without making any payments. In many cases there are ways to obtain additional time or stop the foreclosure altogether. A loan modification may succeed in making the mortgage payments more affordable and the bank will often postpone foreclosure while the possibility is explored. A Chapter 7 bankruptcy can delay a foreclosure sale and a Chapter 13 filing can stop it cold – and give a homeowner 36-60 months to bring the payments current.
In order to raise a defense to the foreclosure action, you must bring the issue before a judge. This is automatic in about half the states, where foreclosures are typically accomplished through civil lawsuits and judicial foreclosure orders.
In the other states, foreclosures typically take place outside of court (these are called nonjudicial foreclosures) and you have no automatic means to mount a legal challenge. To have your defenses ruled on by a judge in these states, you have to file a lawsuit alleging that the foreclosure is illegal for some reason and asking the court to put the foreclosure on hold -- pending the court's review of the case.