“Foreclosure” is a word that no homeowner ever wants to hear. Foreclosures occur when you’re no longer able to make payments on your home, often due to circumstances outside your control, like job losses or medical bills. The consequences of a foreclosure can be life-changing. If you’re facing a foreclosure, you’re at risk of incurring astronomical fines and fees, damaging your credit score, and even losing your home.
However, it’s important to understand that you have more protections than ever before thanks to recent changes to Colorado’s foreclosure laws. Becoming familiar with these changes can help you minimize many of the harshest consequences of a foreclosure, and might even allow you to keep your home. Here are the most important changes you should know about if you’re facing foreclosure on your home.
Colorado House Bill 07-1157
Colorado House Bill (HB) 07-1157 went into effect in January 2008. This bill represents an extensive effort to streamline and modernize the foreclosure process in Colorado. Many of these changes focused on the “cure period,” or the time between the start of a foreclosure case and the initial sale of the foreclosed home.
The 2008 law lengthened the cure period from 45-60 days to 110-125 days, and his change has proven overwhelmingly beneficial to homeowners facing foreclosure. You now have almost twice as long to work with lenders, foreclosure attorneys, and credit counselors to “cure” your default through a loan modification or payment plan. As a result, you may be more likely to receive an interest rate adjustment or an extension on your loan. Your lender might also be willing to delay the foreclosure altogether, a move known as “forbearance”.
The fact is, most lenders would prefer to avoid foreclosure because they often end up losing money on the re-sale foreclosed homes. The extended cure period encourages lenders to seek alternate resolutions that may be more beneficial to both you and the lender.
HB 07-1157: No More Redemption
Not all of the 2008 changes to Colorado foreclosure law work explicitly in homeowners’ favor, however. Some changes, like the repeal of Colorado’s redemption laws, made it much more difficult—if not impossible—for homeowners to reclaim ownership of their home after the foreclosure sale is complete.
Prior to 2008, a former owner had 75 days to “redeem” his or her home by paying the new owner the total price of the home, including any foreclosure fees and interest incurred. HB 07-1157 did away with this process altogether, meaning once a home has been sold, the former owner has no opportunity to get it back.
This change may seem harsh, but many argue that removing the redemption period actually protects foreclosed homeowners. Redemption was a difficult process even before 2008, since a foreclosure on your credit report makes it difficult to receive a new loan. This left many former homeowners vulnerable to “credit vultures” who preyed on borrowers’ desperation by providing predatory loans that were difficult, if not impossible, to ever repay. The truth is that very few homeowners ever regained their homes through redemption prior to 2008. Getting rid of this option shifted the focus to the cure period, which is a far more attainable way to regain ownership of your home.
Changes in 2015: Good News for Homeowners
When the foreclosure crisis of 2009 steamrolled the U.S. housing market, many lawmakers realized the pressing need for extensive change. While federal investigations continue to target predatory lending practices, Colorado made several direct changes to state law to help homeowners stay in their homes.
This is an ongoing process that’s likely to continue into the future, but several major changes already went into effect on January 1, 2015. Two of the biggest changes include those outlined in HB 14-1130 and HB 14-1295, which Governor Hickenlooper approved just last year.
House Bill 14-1130
Though HB 07-1157 helped homeowners by lengthening the cure period, it does little to protect you from being overcharged by unscrupulous lenders while seeking to repay what you owe on your home.
In Colorado, a homeowner can stop the foreclosure process by requesting a “cure statement” that details how much you must pay to cure the default. Cure statements often include fees for a Rule 120 hearing, which is when the judge authorizes the sale of a foreclosed home. Despite the fact that many “cured” foreclosures never reach a Rule 120 hearing, the cure statement may charge Rule 120 fees anyway—forcing you to pay for a hearing that never happened.
This is just one example of the many ways you can be overcharged on a cure statement. But thanks to HB 14-1130, cure statements must now be 100% accurate, and your lender’s attorney must verify that all costs and fees are both real and exact. In fact, any charges outlined in the cure statement must be backed up with receipts that prove the costs billed to the homeowner. If you suspect foul play, you are now entitled to receive copies of these receipts through a written request filed within 90 days of paying the cure amount.
Additionally, if it turns out that you have overpaid, the trustee must return the excess payment directly to you, the homeowner. This may seem like common sense, but prior to January 1, 2015, the law didn’t explicitly require refunds, so many lenders and their attorneys would simply keep the overage.
House Bill 14-1295
Colorado’s new foreclosure laws also provide extra protections for homeowners seeking alternatives to foreclosure. Though this law applies only to single-family homes and small multi-family properties that serve as the homeowner’s primary residence, it has the potential to help many homeowners keep their property and avoid foreclosure proceedings for good.
The first thing HB-14-1295 does away with is the practice of dual tracking. Dual tracking happens when a homeowner pursues loss mitigation option, such as a loan modification, but the lender continues the foreclosure process anyway. The case is therefore on two “tracks” at once.
Prior to this law, homeowners were forced to race against the clock to keep their homes from being foreclosed on. If the loss mitigation process wasn’t complete by the time the foreclosure process ended, the homeowner would be forced to foreclose despite his or her best efforts.
Under the new law, the public trustee in charge of your foreclosure case can stop the process if you’re in the middle of loss mitigation proceedings. If you’re applying for an alternative to foreclosure or have already accepted a loss mitigation option, you can write to the trustee to ask for the foreclosure to be postponed. Though postponement is left up to the trustee’s discretion, this law will help many homeowners complete the loss mitigation process in time to keep their homes.
Another major change implemented by HB 14-1295 is the designation of a single point of contact. This law requires lenders to provide a single point of contact for the homeowner to call regarding loss mitigation options, deadlines, and requirements. Thanks to this change, you can get a straight answer to your questions instead of relying on potentially inaccurate or incomplete information provided by someone who isn’t familiar with your case.
How Changes to Foreclosure Laws Affect You
The recent changes to Colorado’s foreclosure laws are good news for homeowners facing this difficult situation. However, many of the new laws that benefit homeowners aren’t common knowledge, especially among homeowners attempting to navigate foreclosure on their own. If you’re not aware of these changes, you could miss out on the opportunity to reduce your payments, protect your credit, or even keep your home.
Foreclosure is an especially complex and stressful type of case. With your family’s home at stake, it’s all too easy to fall prey to lenders looking to exploit your vulnerable situation. That’s why our compassionate legal team is dedicated to pursuing the best possible outcome for your case, no matter how difficult your situation may seem. We specialize in staying abreast of all changes to Colorado’s foreclosure laws, so we can invoke every protection available to help you keep your home.
If you’re facing an upcoming foreclosure or your foreclosure proceedings have already begun, make sure to call our office at (303) 741-2354 to find out how we can help you in this difficult time.
Eric L. Nesbitt, Esq.
Law Offices of Eric L. Nesbitt, PC
Nesbitt Law Offices Website