CO Gives Owners More Time to Fix Foreclosure
A state law that took effect Jan. 1 gives Colorado homeowners who enter foreclosure more time to “cure” the loan in foreclosure before the public foreclosure sale.
In the past, Colorado homeowners had 45 to 60 days from the commencement of foreclosure proceedings — initiated by what is called a notice of election and demand — to cure the loan by making all past-due payments along with late charges and other costs. Under the new law, created by H.B. 1387, most homeowners now have 110 to 125 days to cure the loan (owners of agricultural property have 215 to 230 days).
The law also eliminates the 75-day redemption period previously available to homeowners. This redemption period allowed homeowners who had been foreclosed on to buy back their homes after the public foreclosure sale by paying the winning bidder the amount of the winning bid.
“For that reason, about the only way to pull off a redemption is to sell the property, accomplish a miracle refinancing, bag a timely inheritance or win the lottery,” writes attorney Jim Flynn in the Colorado Springs Gazette. “The new law, in recognition of the fact that owner redemptions have been few and far between, has done away this right. As a trade-off, however, the period of time in which a cure can be accomplished has been extended.”
The Colorado Division of Housing told DSNews that it did not think the new law would affect the number of initial foreclosure filings, but would at least give homeowners more time to avoid losing their property at the foreclosure sale. Colorado’s foreclosure rate of one foreclosure filing for every 320 households in November ranked fourth highest among the states, according to RealtyTrac.
The longer upfront time to cure also gives real estate investors more of a chance to work out deals with homeowners in foreclosure who want to sell. And with the federal government removing the tax on forgiven mortgage debt last month, more short sale opportunities may also be available during the pre-foreclosure grace period.