What is Foreclosure and How Does it Work?

Authored By: Colorado Legal Services

Foreclosure and How it Works

What is foreclosure?

Foreclosure is a legal process by which a lender terminates or ends the borrower's rights to the mortgaged property by selling it for the purpose of satisfying an unpaid debt.

When does a lender initiate a foreclosure?

A lender initiates foreclosure after default in payment of the mortgage note or default of other terms in the mortgage document. The most common reason for a lender initiating foreclosure is that payments are not being made when due. Typically, foreclosure starts after a borrower has missed three mortgage payments, though this is not a hard and fast rule and foreclosure can commence at any time after a payment is missed.

How do I know when foreclosure has begun?

Most foreclosures are conducted by the Public Trustee of the county where your house is located. A foreclosure starts when the lender records a Notice of Election and Demand for Sale with the Public Trustee.

You will receive a notice by mail from the Public Trustee advising you of the date and time of the sale and of your rights. It is very important that you read these papers very carefully. If you have questions about the status of your foreclosure, please contact the Public Trustee's office with your foreclosure sale number if you have it.

Click here for the Denver Public Trustees office contact information.

For Public Trustee's Offices statewide click here.

As part of a Public Trustee foreclosure, you will also receive some court papers from the foreclosing lender's attorney. These papers may include a Notice of Hearing referring to a motion being filed by the lender asking the District Court of the county where your house is located for an order authorizing the foreclosure sale. This is typically referred to as a motion under Rule 120. In a Rule 120, the court will generally address the issue of whether you are in default. However, you can file with the court a response to the motion under Rule 120 if you believe that there are reasons why the foreclosure should not take place.

If you are going to file a response, you must file a response no later than 7 days prior to the hearing and pay a filing fee to the court, or seek to have the filing fee waived if you are indigent. For the form needed to request a fee wavier (JDF 205) from the Colorado Judicial Branch website click here. Fill out the caption on JDF 206 too and file it along with JDF205. It is important to note that there will not be a hearing unless you have timely filed an answer with the court.

What other types of foreclosure are there?

While most foreclosures are conducted by the Public Trustee, not all are. Other types of foreclosures or forced sales of property include the following:

Judicial Foreclosure
Another type of foreclosure is called judicial foreclosure. In a judicial foreclosure action, you must be served with a Summons and Complaint from the foreclosing party. The court papers will request that the court issue an order, or decree, permitting that party to conduct a foreclosure sale. If the party obtains the court order, then the foreclosure sale will be conducted by the Sheriff of the county where the house is located. While not common, this type of action would be initiated by a party who is unable to file a Public Trustee foreclosure. The most common example of a situation where a judicial foreclosure is used is where a homeowners association is seeking to foreclosure on a unit for unpaid assessments. In a judicial foreclosure action, you must file an answer with the court by the date listed in the Summons or the court may enter a default judgment against you granting the request sought in the Complaint. If you are going to file an answer, you must pay a filing fee to the court or seek to have it waived if you are indigent. If you have questions about the status of a judicial foreclosure action, please call the court where the papers were filed. While this type of foreclosure is conducted by the Sheriff, the law that applies is nearly identical to the laws involving a Public Trustee foreclosure.

Levy by Writ of Execution
In rare instances, the holder of a lien may request that a court issue a Writ of Execution requesting that the Sheriff order the house and any personal property sold to satisfy an unpaid debt. The Sheriff cannot levy on any property that is exempt, or protected by law, from execution. Colorado law provides that certain property is protected from execution. For example, the homestead exemption in Colorado currently permits homeowners to protect up to the value of $75,000 ($105,000 if either disabled or at least 60 years old) in property that is occupied as their primary residence.

Request for Issuance of Tax Deed
Finally, while not technically a foreclosure, another way in which a house can be sold to pay an unpaid debt is where property taxes remain unpaid for several years. If a homeowner fails to pay their property taxes when due, then the county sells the unpaid taxes in a tax lien sale in the fall of each year and the purchaser obtains a lien on the house. A homeowner has three years to redeem, or pay off, the tax lien before the purchaser is eligible to apply for a tax deed to the house and becomes the owner of the property.

What if I can't make my mortgage payments?

If you cannot make your mortgage payments, the first step in avoiding foreclosure is to talk with your mortgage lender. You may ask for time to catch up on your missed payments or negotiate for reduced payments. Many lenders are willing to enter into some type of repayment agreement if you fall behind on your payments due to an unforeseen crisis or hardship. In order to get assistance to talk to your lender, you may wish to contact a HUD-approved housing counseling agency.  You can call the Colorado Foreclosure Hotline at 1-877-601-HOPE (4673) to help you find a HUD-approved counseling agency.

If you have an FHA-insured mortgage, you can apply for a special forbearance, under which the lender will simply hold off on foreclosure for. If you wish to apply for a special forbearance, you should speak to your lender or better yet speak to a HUD-approved housing counseling agency. Click here for a list of HUD-approved housing counseling agencies in ColoradoYou  can also apply for other loss mitigation options, such as a loan modification, partial claim or repayment plan.

If you have a VA-insured mortgage, you can also contact your lender and  apply for other a special forbearance, loan modification or repayment plan. You can also ask the Veterans Administration to refund the loan. This means they will take over the loan. For more information about VA refinancing, call or go to the VA Loan Service and Claims, click here for their contact information.

If you are calling from outside the Denver metropolitan area, you may call 1-800-319-9446. Be sure to have your VA loan number with you when you call or go there. It is not the same as your mortgage number and can be found on your loan settlement papers.

If you have a loan that is owned by Fannie Mae or Freddie Mac, you may also be eligible for loan workout options.


Even if you do not know whether your loan is one of the types above, then you should still seek out foreclosure alternative options by contacting your lender.

What are the deadlines that I may face in a foreclosure?

There are many deadlines in a foreclosure and special care must be given to understand them, since missing one or more could have severe consequences.  One very important deadline is the time to file a notice of intent to cure with the Public Trustee, which is a request for the specific amount needed to reinstate, or cure, the foreclosure.  This must be done by no later than 15 days prior to the foreclosure sale date.  If you are able to find the funds to cure, then the money must be paid to the Public Trustee by no later than 12 noon the day before the sale.  The most significant deadline for any homeowner in foreclosure is the sale date, since if the sale takes place then the homeowner’s rights in the home are terminated.  Thus, any action to try to address a foreclosure, whether it is reinstating the loan or selling the home, must take place prior to the foreclosure sale.

Is there any way to stop a foreclosure?

The easiest way to stop a foreclosure is to pay the amounts due to bring the loan current (catch up on your mortgage payments), plus costs and attorney fees.

What if I don't have the money to catch up on my mortgage payments?

If you do not have the money to bring your loan current, then the first step should always be to talk to your lender about foreclosure prevention options, as stated above.  While there is no guarantee that you may qualify for a foreclosure prevention option, in many cases borrowers have been offered ways to keep their house from going to foreclosure, such as by a loan modification or a repayment plan.

If you cannot get your lender to assist you, then another option would be to borrow the money you need from a bank, a finance company, or a credit union. Always use caution in deciding to take out another loan. The fact that you have fallen behind on your payments will limit the types of loans for which you might qualify and you may not be able to obtain the best loan terms despite what is promised or advertised. Often times, the only type of loan that you may qualify for may contain very unfavorable terms, such as a high interest rate or a balloon payment (i.e. a mortgage loan that becomes due in full in a very short time).

It is also not unusual for a homeowner to be solicited aggressively for all kinds of foreclosure rescue options, which may include signing over the deed to the house. Because of the rise in "predatory lending," you should consult with an attorney, a housing counseling agency or a reputable mortgage lender prior to refinancing or signing any other papers while your house is in foreclosure.

Yet another way to stop a foreclosure is to file a Chapter 13 bankruptcy, or a reorganization. A Chapter 13 will stop a foreclosure and may help you keep your home if you can make payments on the past due amounts, usually over a maximum period of up to five years. The Chapter 13 involves a Plan, in which you will make monthly payments to a Trustee who will then distribute the payments to repay your past due mortgage arrears over time and other debts that you may have. Chapter 13 would require you to maintain your regular mortgage payments as they become due. Since Chapter 13 can be complicated, you are urged to consult with an attorney who practices in the area of consumer bankruptcy law.

Another way to stop a foreclosure is to file a lawsuit, assuming that you have a defense to the foreclosure. There are many legal defenses that may be available, including but not limited to fraud, misrepresentation, failure to give notice required by law, interest rates higher than provided by law, unconscionability and the expiration of the statute of limitations. Assessing whether you have a legal defense or grounds to file a lawsuit to stop the foreclosure sale may require the assistance of a private attorney and we suggest that you find one to assist you if you believe you have legal defenses to the foreclosure.

Who owns my home during a foreclosure?

You do. It is very important to remember that you are still the owner of your home, even if it is being foreclosed.

Because there is a lot of misinformation about foreclosure, we encourage you to consult with an attorney if you have any questions about the process and your options. If you need help finding an attorney and you do not qualify for free legal services with Colorado Legal Services, you have some other options. Go to the "Find legal Assistance" section of this website to see if there are other non-profit legal aid programs that can help you. Go to the Colorado Bar Association's website - - click on "Find an Attorney", fill out the form, including clicking on "Alternative Fee Arrangements", and click "Continue" to get a list of attorneys who could potentially help.



This communication is made available by Colorado Legal Services, Inc., (CLS), as a public service and is issued to inform not to advise. No person should attempt to interpret or apply any law without the assistance of an attorney. The opinions expressed in this communication are those of the authors and not those of CLS or its funding sources.

Last Review and Update: Feb 20, 2017