President/General Counsel of Cherry Creek Title Services, Inc.,
Agent for Commonwealth/Fidelity & First American
The majority of foreclosures in Colorado involve deeds of trust foreclosed through the Public Trustee. Colorado’s Public Trustee system is unique to Colorado. Any mortgage can be judicially foreclosed, and many have no other option. This article shall discuss the basics of judicial foreclosures in Colorado.
Actions to foreclose mortgages or deeds of trust through the court system in Colorado require they occur in District Court in the county where the property lies under C.R.C.P. 105. Sometimes there are tactical reasons why attorneys choose judicial foreclosure rather than foreclosure through the public trustee such as the ability to combine the foreclosure remedy with other claims against the defendant or perhaps to resolve other issues such as the enforceability, amount and/or the priority of liens affecting the property title. Sometimes the property straddles more than one county. And although less often than in the past, sometimes the deed of trust and or note has an incurable defect that the Public Trustee refuses to allow a correction affidavit or scrivener’s affidavit to fix inconsistencies between the note and deed of trust or other typographical errors thereby forcing the lender to foreclose judicially. In many ways, judicial foreclosures often end up unfair to the defaulting borrower due to the expense and delay which just runs up the default interest higher than what would exist if a PT foreclosure was allowed. Nonetheless, judicial foreclosures are necessary for many reasons and are the only path to foreclose involuntary liens such as mechanics liens, tax liens, HOA liens and such since no deed of trust exists giving the Public Trustee the power of sale and authority to foreclose involuntary liens. See C.R.S. 38-33.3-316(d)(11) and C.R.S. 38-22-113.
Judicial foreclosures take longer and cost more than Public Trustee foreclosures, and predictably occur far less often. Sometimes it’s filed as an action merely regarding the subject property (in rem), and sometimes there is the need to involve other people as defendants to resolve issues or because they have personal liability (in personam). It’s procedure regarding notification of the defaulting parties and others with recorded interests in the property are very similar to PT foreclosures as are the rules regarding commencement, notice, cure, redemption, etc. A Litigation Guarantee or Foreclosure Certificate is obtained by a title company at the time the action is commenced.
The lender is seeking an Order of Judgment and a Decree to Foreclose. Once that is obtained, the foreclosure procedure is handled by the Sheriff very similar to how the PT handles PT deed of trust foreclosures. Once concluded, the Sheriff initially issues a Certificate of Purchase which is assignable. At the end of all the redemption periods, the Sheriff will issue a Confirmation Deed, a form of Bargain and Sale Deed, just as the PT does after a PT foreclosure.
This article purposely omitted many complexities and provisions that impact Judicial Foreclosures such as notice requirements, cure, redemption, omitted parties; the possibility the defaulting party is in the military; bankruptcy issues, water rights and many other complex issues. Such issues would require a very lengthy discussion and are best handled by attorneys experienced in these matters. This article was merely intended to provide the reader with a basic understanding of judicial foreclosures in Colorado. I cannot imagine not using a skillful attorney experienced in judicial foreclosures should the need ever arise. Besides some of the possible complexities already mentioned, issues involving the Fair Debt Collections Practices Act; the determination of personal and real property and other complex issues often arise. Further, it’s an actual District Court case, and not merely an administrative procedure. So, a strong knowledge of litigation and procedural rules is required besides the intricate knowledge necessary to successfully handle a judicial foreclosure.
This article is intended for educational purposes and not as legal advice
It is always advisable to seek the advice of a licensed attorney regarding the issues discussed in this article. Judicial foreclosures are complex matters that require skillful attorneys experienced in handling them.