Foreclosures
Colorado currently leads the nation in the rate of foreclosures. In this environment, many property owners face losing their properties, and many potential investors seek good deals. Potential investors sometimes offer a "win-win" deal to property owners in distress. In other cases, unfortunately, investors prey on desperate property owners and end up with the foreclosed properties without benefiting owners.
In response to this environment, the Colorado legislature changed foreclosure law significantly, with some changes effective this past summer, and others not effective until July 2007. Like most well-intentioned laws, this one addresses some past abuses, but also contains costly or confusing requirements that property owners and would-be investors need to understand.
Homeowner's Cure Period and Redemption Period→ Homeowner's Cure Period Only
In a foreclosure action, a lender or other lienholder takes action against the real estate securing the loan or encumbered by the lien, and forces the sale of the property by the county public trustee to pay for some or all of the debt.
Under the previous law, the property owner received notice of the pending sale, and first had the opportunity to cure the foreclosure before the property was sold. This process took up to 60 days, allowing for the required notice and court hearing before the public trustee's sale could take place. The property owner then typically had another 75 days to redeem the property from the foreclosure after the public sale had taken place.
Beginning in the summer of 2007, the new foreclosure law eliminates the redemption period for the owner after the sale date, but lengthens the time before sale the owner has to cure to roughly four months. The effect is that the owner has the same total timeframe to avoid foreclosure, but that all efforts to rescue the property must take place before the actual sale.
Who has the right to redeem?
The new law also limits who can redeem the property from foreclosure after the sale. Previously, both the property owner and nearly all of those with lien interests in the property behind that of the foreclosing party had an opportunity to redeem the property from foreclosure andown the property, provided all of the superior interests were paid off. The new law limits who can redeem, and generally cuts off redemption rights for any new liens created after the foreclosure process has begun. The likely purpose of these changes is to stop unscrupulous investors from persuading desperate property owners to place new, voluntary liens on the property, after the foreclosure process has begun, solely to benefit these investors.
Equity Purchasers and Foreclosure Consultants Beware
A separate law, passed and effective this summer, mandates new obligations for foreclosure investors, whom the law refers to as "equity purchasers." It also places restrictions on "foreclosure consultants": defined, with some key exceptions, as those who seek compensation for helping property owners facing foreclosure, but do not take ownership of the property.
The law requires equity purchasers dealing with "home owners"--property owners who reside in the property under foreclosure--to put all agreements in writing. It lists terms an agreement must contain. It mandates a specific form notice that must be given to the home owner, along with disclosure of the home owner's right to cancel the agreement. It restricts the use of "lease-purchase option" agreements, and requires that the equity purchaser using such agreements ". . . verifies and can demonstrate that the home owner has or will have a reasonable ability to make the lease payments and to repurchase the residence . . . ."
The law even requires that all of the written documents provided to the home owner facing foreclosure be translated into any other language spoken by the home owner.
La Ley incluso requiere que todos los documentos en escrito proveídos al propietario enfrentando una incautación sean traducidos a cualquier otra lengua hablada por el propietario de la vivienda.
Cette loi exige, en plus, que tous les documents fournis à un propriétaire d'un domicile sous la forclusion soient traduits à chaque langue que le propriétaire parle.
Das Gesetz verlangt sogar, dass alle Dokumente, die dem Hauseigentümer, der sich Zwangsversteigerungsverfahren befindet, vorgelegt werden, in die Muttersprache des Hauseigentümers übersetzt werden m üssen.
The law requires foreclosure consultants dealing with home owners to put the terms of their agreements in writing, to provide specific notices and rights to cancel these agreements, and limits both as to what terms these agreements can contain and the means that foreclosure consultants may use to get paid or to deal with the property.
It is important for property owners facing foreclosure, foreclosing parties, and would-be investors to know the rights, obligations, and timeframes that apply in their respective situations. This summary has been necessarily brief, and has touched on only a few recent changes to foreclosure law. It is intended as general information only; it is not intended as, and should not be construed as, legal advice for any specific situation. If you have questions about a foreclosure issues, Patterson Tabert Law Offices welcomes your inquiry.
