What Homeowners Need to Know When Facing Foreclosure

Understanding the Foreclosure Process

What Is Foreclosure?

Foreclosure is the process that allows a lender to recover the amount owed on a defaulted loan by selling or taking ownership (repossession) of the property securing the loan. The foreclosure process begins when a lender files the appropriate documents with the appropriate officials (see below for more details).

Colorado Foreclosure Laws

Colorado foreclosures occur through both in-court (judicial) and out-of-court (non-judicial) proceedings.

The judicial process is used when no power of sale is present in the mortgage or deed of trust. The process begins when the mortgage lender files suit with the court system. The borrower then receives a letter from the court demanding payment. Typically, you’ll be given 30 days to respond with payment or a written response to the bank’s attorney and parties involved. If you do not respond within the time limit given, a judgment will be entered and the lender can request sale of the property by auction. If you file a written answer with the court, there is a hearing and the process takes longer and can even be forestalled. If a judgment is entered, then an auction date will be set, usually several months in the future. Once the property is sold, you’re served with an eviction notice by the sheriff’s office, and you must vacate the home immediately.

The most commonly practiced method of foreclosure in Colorado is the non-judicial foreclosure process. It is carried out by a Public Trustee who acts as an impartial party. The process begins when the lender files the required documents with the Public Trustee of the county in which the property is located. The Public Trustee then files a “Notice of Election and Demand” (NED) with the county clerk and recorder. Once the NED is recorded, the Public Trustee Sale of the property is scheduled to take place between 110 and 125 days of the recording.

Pre-foreclosure Period

Many factors can lead to default of payment on a home loan and eventually foreclosure. Many are not the fault of the homeowner. Perhaps it is due to a hardship (loss of income, military deployment, health or family issues) or to “loan fraud” or “creative financing” by the banks (Adjustable Rate or ARM, Option ARM, Negative Amortization, or Interest Only loan). Whatever the cause, facing foreclosure is not an enjoyable experience.

The foreclosure process usually begins after the homeowner has missed several payments and different attempts have been made by the bank to collect. Let’s look at what typically takes place and what you can normally expect.
Day 1: You miss your first payment
Day 1-15: Grace period (Some lenders only allow 10 days)
Day 16-30: A late charge is assessed
Day 30: Borrower is in default
Day 45-60: Lender sends “demand” or “breach” letter, and phone calls begin
Day 60-90: Lender sends letters and makes phone calls. A repayment plan or a loan modification plan may be offered.
Day 90-105: The lender refers the loan to the loss mitigation department/foreclosure department and retains an attorney to handle the foreclosure.
Day 90-?????: The lender’s attorney files the required documents with the Public Trustee, who then files a NED with the county clerk and recorder. Once the NED is recorded, the property is scheduled to be sold within 110-125 days at a Public Trustee Sale.

Notice of Sale / Auction

Once the NED (Notice of Election and Demand) is recorded, the notice must be published in a newspaper of general circulation within the county where the property is located for a period of 5 consecutive weeks. The Public Trustee must also mail a copy of the published notice to the homeowner within 10 days. At least 21 days before the Public Trustee Sale, the Public Trustee must mail a notice to the homeowner describing how to redeem the property and stop the sale.

If the homeowner wants to redeem the property and stop the Public Trustee Sale, he must file an “Intent to Cure” with the Public Trustee’s office at least 15 days prior to the foreclosure sale. He then has up till noon of the day before the sale to bring the loan current and redeem the property.

The Public Trustee typically conducts the sale at the courthouse. Bidders must register in advance and have funds available. At the sale, the public trustee reads the written bid submitted by the lender, then any registered party may bid. The winning bidder is given a certificate of purchase.

Redemption Period

There is no longer any redemption period for the homeowner after a foreclosure sale in Colorado.

How to Avoid Foreclosure -What Are Your Options?

It’s a harsh word that most people avoid thinking about…until they have to. If you are several months behind on your mortgage, without money for professional help, and at the end of your rope…foreclosure may be the ONLY thing you can think about. It preys on your mind and leaves you feeling lost and vulnerable to the come-ons of the unscrupulous ‘professionals’ who say that they are experts in foreclosures, but aren’t. STOP!

You may be in a difficult situation, but it is not hopeless. Foreclosure is not your only option! My name is David Stitt, and I’ve got good news for you. You do have alternatives. You just can’t see them right now. But by the time you finish this short guide, your vision will have cleared and options for your future…good options…will be right before your eyes.

You are not alone! In the United States, foreclosure filings have increased consistently over the past few years, with more new foreclosures reported in every quarter, pushing the foreclosure market to record levels. So you are not alone. But if you’re like the many thousands of people facing foreclosure, you’re scared and confused. You’re overwhelmed by the legal mumbo-jumbo of foreclosure litigation. You don’t know who or what to trust. You’ve undoubtedly been pinned to the mat by Realtors and Attorneys, warning you about the dire consequences you’ll face if you don’t use their services. Or maybe you’ve worked with mortgage brokers. They promise the world – or world-class loans – and then they don’t deliver. And then there’s the holder of your mortgage who is unwilling (maybe after months of negotiating) to budge an inch when it comes to working out a more affordable payment plan.

After all you’ve probably been through, I’m not surprised that you’ve given up hope for a ‘good’ solution and may feel resigned to accepting foreclosure and the years of damage it will do to your credit rating. Once again, STOP! Don’t fall into despair. Things are not as bad as they seem. There are other options.

A helping hand when you need it.
This Survival Guide is exactly what the name says it is: a simple, no-nonsense approach to foreclosures. It was created to help you and other homeowners become better informed about the details of the foreclosure process. I believe that knowledge is power…and I hope that this guide will give you the power to avoid foreclosure entirely.

Once you know the facts, you’ll be able to make a well-reasoned and thoughtful decision and then take action with the confidence that you’re doing what’s best for you.

On the next couple of pages, we are going to take a look at your different options and the pros and cons of each. You will be given the information you need to make a well-educated decision regarding your situation.

What Are Your Options?

Forbearance is a payment plan that a debtor enters into with a lender when they are unable to make timely payments, often due to illness or another temporary situation. In forbearance, the lender will allow you to delay payments for a short period. You agree that after missing payments for a few months you will bring the account current by making larger payments. The problem is, more than 85% of debtors default after the first payment. They cannot continue to make the inflated payments after the forbearance period ends, and they are right back where they started.

Loan Modification
A loan modification is a permanent change in one or more of the terms of a mortgagor’s loan. This may help you catch up by reducing the monthly payments to a more affordable level. You may qualify if you have recovered from a financial problem and can afford the new payment amount. However, Loss Mitigation Departments are now undermanned, under experienced, and overworked. Nightmare stories abound on the subject of patrons having to hound and harass Loss Mitigation Departments to get their paperwork pushed through to escape foreclosure. After all the hassle, most homeowners are still denied any help and end up in foreclosure.

Partial Claim
Your lender may be able to work with you to obtain a one-time payment (loan to be paid at end of mortgage) from the FHA-Insurance fund to bring your mortgage current. You may qualify if your loan is 4-12 months delinquent and you are able to start making full mortgage payments.

Deed-In-Lieu (Voluntary Foreclosure)
As a last resort, you may be able to voluntarily “give back” your property to the lender. You may qualify if you are in default and don’t qualify for any of the other options, your attempts at selling the house before foreclosure were unsuccessful, and you don’t have another FHA mortgage in default. “Foreclosure” will most likely be reported on your credit report.

Loan Assumption
This is where someone else takes over the payments of your loan, usually in exchange for your property. Loans made after 1988 are almost never assumable.

Many debtors will spend a lot of money for an attorney to file a Chapter 13 bankruptcy – which is really a payment plan – only to lose the house. In essence you are paying the attorney instead of the lender. Before acting, know how much the process will cost and what your new increased monthly payment will be. Also know that if you miss one payment, your Chapter 13 will be dismissed and you will need to file Chapter 7. This will cost more attorney fees, assets, including your house will be liquidated and your credit report will still show a foreclosure.

Sale of Property
If the homeowner has equity in the property they can and should consider selling the property. The homeowner will receive a check at closing for equity over and above what is owed and closing costs paid. Most homeowners in foreclosure, however, have little or no equity. Be careful listing with a Realtor that can tie up your property for months.

Do Nothing
When it comes to the threat of foreclosure, procrastination is a prescription for disaster. Doing nothing changes nothing. Unless you take action, you will end up in foreclosure and your credit will suffer for the next 5-7 years.

Pre-Foreclosure Sale (Short Sale)
The pre-foreclosure sale program allows the lender in default to sell his/her home and use the net sale proceeds to satisfy the mortgage debt, even though these proceeds are less than the amount owed. It has two major advantages over a foreclosure: (1) You may be eligible for a new home loan after just 2 years instead of 5. (2) You should be able to avoid a deficiency judgment. When a house is sold at auction, the chances of the foreclosing lender filing a deficiency judgment increases dramatically. They will have years to come after you or to sell it to someone else who will.

As you can see, there are several options to consider – but consider you must! You cannot afford to stick your head in the sand like an ostrich and do nothing. Being in the state of denial is a bad state to be in! And as we said earlier, procrastination is a prescription for disaster.

Questions You Need to Ask

Questions You Need to Ask Yourself
1. If I file Chapter 13 Bankruptcy, will temporary relief from my monthly mortgage payments mean that I will be able to stop foreclosure forever…or will I be unable to keep up with my payments when they resume and I end up in foreclosure again?
2. If I choose Forbearance or a lender payment plan that gives me temporary relief from payments I can’t afford now….will I be able to afford the inflated monthly payments that I’ll have to make in the future, or will I end up in foreclosure again?
3. If I am unable to meet my monthly expenses now, can I commit to a payment plan…or should I just give up my house to a lender with a Deed In Lieu and accept the bad foreclosure mark on my credit history?
4. If I do something now, will I have more options available to me…or should I wait until the sheriff is at my doorstep with an Order to Vacate and hope that he/she will show me mercy?
5. If I consult with an experienced Real Estate Investor, will I be able to get out of this situation without ruining my credit…or is my only option to spend thousands of dollars for Attorney fees, Realtor commissions and still run the possibility of losing my house?

Questions to Ask Your Mortgage Broker
1. Do you guarantee in writing that you will close my loan before my case goes before a judge in court?
2. What interest rate will you charge?
3. How many points do you charge?
4. What will my monthly payments be compared to what they are now? Higher? Lower? The same?
5. What will the total of all closing costs be?

Questions to Ask Your Attorney
1. If I file for Chapter 13 bankruptcy, will it stop foreclosure or just stall it?
2. What are your fees for filing bankruptcy papers and handling my case?
3. What will my monthly payments be compared to what they are now? Higher? Lower? The same?
4. What happens if I default on my payments because I can’t make them?
5. Can’t I file a bankruptcy myself at the courthouse and save thousands of dollars?

Questions to Ask Your Realtor
1. Do you guarantee in writing that you’ll sell my house before my case goes before a judge in court?
2. Do I have to pay your commission if I find someone on my own who wants to buy the house?
3. How much do I owe you if you don’t sell the house and I lose it to foreclosure due to a judge’s ruling?
4. If the sale price doesn’t cover my indebtedness and your commissions, do I have to reach into my own pocket to pay you?
5. How long will your listing contract tie up the house and entitle you to a commission?

Questions to Ask Your Foreclosing Lender
1. Can you work out a payment plan (forbearance) with me and will you put everything in writing before I agree to it?
2. If I agree to these terms, will you agree in writing to stop the foreclosure?
3. What will my monthly payments be, compared to what they are now? Higher? Lower? Same?
4. If I’m late on this payment plan, do you start where you left off with the foreclosure?
5. Since forbearance means a big increase in monthly payments, can you tell me how many people end up back in foreclosure because they cannot afford the monthly payment?

What To Do Now

Step 1: Get answers to your questions.
Not only do you need answers to the questions above, but there may be other questions you are asking yourself. Don’t be intimidated by the ‘experts’ you’re consulting. Remember they work for you.

Step 2: Make a decision…and follow through on it!
Once you have the facts you can decide on how to proceed and who you need to help you. The sooner you act, the sooner you can reverse the downward spiral and change your credit from bad to better.

Step 3: Act Now!
After you’ve done your homework and feel you’ve come to an informed decision, you’re halfway there. Don’t let inertia set in. Don’t procrastinate. ACT NOW before your window of opportunity closes.

One final thing to consider: Get a Forensic Loan Audit!

A large majority of the loans made during the last 10 years, especially sub-prime and adjustable rate mortgages were not done properly and have errors and violations.

The Forensic Loan Audit is the FIRST STEP you should take to properly prepare for any type of litigation or any type of solution when dealing with your lender. Audits are used as a valuable tool to get your file to the top of the lender pile and to get your case noticed and heard!

The more violations found in your mortgage, the more LEVERAGE you have to argue your case against your lender. With millions of homeowners requesting financial solutions, it is increasingly more difficult to get the results you want when you need them. You need every tool, every amount of leverage possible! The Forensic Loan Audit is that tool!

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Foreclosure Defense Strategy – Clients in Search of a New Paradigm

attorneys who defend foreclosure cases. To date, DCH has produced three motions to assist attorneys implement the new strategy.

Viewed from afar, the short, unpleasant history of foreclosure during the last three years presents a sorry spectacle. Far too many judges in foreclosure proceedings have stopped behaving like judges and instead become advocates for the foreclosure mills. The parties that foreclose continue to ignore and avoid alternate dispute resolutions.

The government’s efforts to stem the tide of foreclosure and encourage alternate dispute resolutions have been feckless and dissipated. Most people being foreclosed have not discharged their legal obligation to defend themselves. Instead, many if not most foreclosure cases go to summary judgment uncontested. The resulting assault upon American homeownership has been systemic and overwhelming.

Many homeowners in foreclosure believe that legal representation is unaffordable. Unable to make monthly mortgage payments, they conclude that they have no means to hire a lawyer. The public sector which defends people who cannot afford a lawyer has been unable to mount an effective counter- response to foreclosure.

Too much time has been spent on tactics; too little time has been spent on strategy. Foreclosure defense is preoccupied with finding omissions, defects and deficiencies. The tactics tend to show that a rule has been violated.

Too many courts are inclined to forgive and forget. The courts dream up notions such as finding the non-compliance merely “technical” or that the foreclosure is within the “four corners of the loan agreement”.

DCH is calling for a change in strategy. What is needed is a new strategy which is effective and affordable. DCH’s new motion addresses both these requirements.

1. Employ generic defenses to make defense against foreclosure affordable to most of those facing foreclosure.

Instead of a case specific defense custom designed to meet the unique questions of fact and law unique to each case, a defense which most clients confronted by foreclosure can ill afford, DCH is providing pleadings and discovery where one size fits all. DCH is creating generic defenses. The foreclosure mills have declared war on defaulting mortgagors. The cost effective response to litigation filed by the foreclosure mills is counter-measures from a defense mill. DCH provides the bullets for attorneys to fire. By putting foreclosure one the assembly line, every client can afford to retain his or her own hired gun in a foreclosure battle..

There is a conundrum caused by the litigation protocol used in defense litigation to represent clients in foreclosure: It is effective and counterproductive at the same time. Lawyers are taught to approach each case as unique and upon its own merits. We are also taught to employ tactics to complicate the other side’s case and discover damaging information. Lawyers also try to use discovery to find errors and omissions in the other side’s case. A proficient litigator wages war upon the other side with motions, depositions, production of documents, interrogatories and requests for admissions and stipulations. Attorneys are taught that litigation cases are won and lost in pretrial preparation. Many believe that a successful outcome is predicated upon pre-trial strategy. Such tactics are p[art of the litigation protocol and have over time proven themselves to be effective and productive.

The problem lies neither with the tactics nor the strategy. Lawyers approach a litigation case like a tailor making a custom suit. Each case is entitled to receive its unique defense to custom fit the facts and law applicable to the case. The problem when it comes to foreclosure cases is the client. A client who cannot make mortgage payment can ill afford a custom suit. One reason so many cases go to uncontested adjudication is that the client has no way to pay for a custom tailored defense. Three of the four major areas for defense- a defective or fraudulent note, the provenance of the note and consumer protection and consumer fraud statutes and regulations- require an extensive proof of facts. No matter how meritorious the defense, it is not serviceable if a client cannot financially afford it.

Too many foreclosure defendants find themselves between a rock and a hard place. They lack the money required for a custom tailored defense; they cannot obtain legal services pro bono publico; and there are no neighborhood services available for which the defendants qualify financially. Many of these defendants wind up having to appear pro se and lack the ability to do so. A trained attorney litigating against a lay person is an unfair contest for which the lay person is ill equipped to succeed. For every individual who can manage competently to defend against foreclosure, there are countless scores who cannot. Compelled by foreclosure to defend themselves and unable to do so, these homeowners are buried by the judicial system without having a day in court before they lose their homes.

Under these circumstances, lawyers must begin to consider a different strategy. Maybe if a client cannot afford a custom suit, it behooves counsel to take a suit off the rack. To accommodate a wider base of foreclosure defense cases, it is necessary to develop and implement generic strategies where one size fits all. Such strategies would not be dependent upon the facts, circumstances and laws unique to each case. Instead, such a strategy would be dependent upon facts, circumstances and laws which a large number of foreclosure cases have in common.

In this connection, DCH has concluded that the fourth area of defense, securitization, provides a uniquely fruitful field for generic defenses. Factors common to and endemic in all securitizations of mortgages are vulnerable to attack in cases after case where a mortgage has been securitized. A one size fits all defense tactic which is replicable in case after case becomes exponentially more cost effective than a client specific, one time use defense.

The foreclosure mills have stolen a march on the mortgage defense bar. The client base of the foreclosure mill is determined to foreclose at the lowest possible expense. Accordingly they have provided a large number of cases at a fixed rate of compensation per case. This has caused the foreclosure mills to put foreclosure on the assembly line. The tendency to file the same pleadings in case after case irrespective of the facts of the case has led to untold abuses of foreclosure. Nonetheless, by treating foreclosure pleadings as scalable, the foreclosure mills achieve the economies of scale. This serves to reduce the average cost per case.

Defense counsel can succeed by following the example of the foreclosure mills. Instead of custom designed defense, counsel must substitute off the rack, scalable defenses. Such a change in strategy opens up a new and different set of tactics. To date, DCH has produced two motions attacking securitization. One argues that the mortgage is unenforceable. The second argue that the mortgage note is unenforceable. Both apply to any mortgage which has been securitized. DCH has developed a third motion to use in Florida which asserts that the trust is unregistered and therefore unenforceable. All three motions are generic and are not unique to a specific case.

2. Proactively anticipate and address the concern of most judges regarding unjust enrichment if the debtor prevails in a foreclosure defense.

What the courts are saying is that foreclosure defenses as presented defend the indefensible. That a creditor should forfeit the loan because of a technical defect is an inequitable outcome. The debtor is not entitled to an unearned windfall which is precisely the result for which the defense consistently argues. So long as nullification of the debt is the outcome if defendant wins, defendants will continue to lose. Defendants will not succeed in overturning foreclosures unless and until defendants explicitly seek a remedy other than cancellation of the debt.

To succeed, a defense against foreclosure cannot be a one way ticket to a free lunch for the debtor. Most judges will not render a judgment they deem to have an inequitable outcome. Unjust enrichment of the debtor from an undeserved windfall often is used as a rationale which justifies disregarding defects in the foreclosure proceedings. Most judges believe that the debtor borrowed and received the money and should be obligated to repay the loan.

DCH’s most recent motion explicitly states that if the motion is granted, the court should use its equitable authority to declare a constructive trust or constructive mortgage and afford defendant a viable opportunity to effect an alternate dispute resolution. In short, instead of leaving the decision concerning modification at the sole discretion of the parties controlling the securitization, the court would now makes its own determination and more equitably protect the rights of all parties concerned. This affords the defense the proactive opportunity to address the issue of unjust enrichment. It also allows the court order an alternate dispute resolution where the outcome would reduce the loss inflicted upon the creditor.

The judicial choice is not limited to either conferring a windfall upon a defaulted “deadbeat” or allowing large financial institutions to flout existing laws. There is no reason that the note does not properly evidence a debt which has not been paid-even if the note holder is not evident.

Even if the note is legally unenforceable, the court may declare a constructive trust. The court can declare a constructive trust or constructive mortgage and assure payment of the trust and certificate holders. As a constructive trust or mortgage, the court may impose conditions. For example:

(a) Review foreclosure fees and charges.
(b) Consider compliance with consumer protection laws and avoidance of consumer fraud. Where damages have been suffered by the debtor, the court may allow a set-off.
(c) The Court may order mandatory mediation or arbitration.
(d) The Court may modify in any way deemed equitable and appropriate, the mortgage to enable the debtor to make timely payments and the creditor to recover payment of the debt.

The court may consider a wide range of modifications to the note to allow an alternate dispute resolution. This would go a long way to mitigating financial loss to the creditor and moving foreclosure from a first resort to a last recourse.

3. In an adversarial system the person sued is under a legal obligation to defend against the cause of action. Every person in foreclosure requires a competent legal defense; and an affordable legal defense is available.

Our adversarial system of justice legally obligates a person who is sued to appear and defend. A defendant who fails to appear and defend loses the case by default. In civil proceedings, the law provides each defendant only with the opportunity to defend, not a defense. Judges preside to hear a case and make judgment. The judge does not represent or defend the rights of the party filing suit or the defendant. It is shocking and saddening to realize how many Adult Americans do not realize and understand their legal obligation to defend when they are sued. Such ignorance is a function of an inadequate educational system and an indifferent media.

The avalanche of foreclosures resulting by adjudication in uncontested cases demonstrates how many homeowners fail to realize that they have an opportunity, duty and obligation to appear and defend against foreclosure. The message is lot that effective, affordable and realistic defense of foreclosure has the highest likelihood of achieving an alternate dispute resolution whose consequences to the debtor are significantly preferable to foreclosure.

The members of the bar who want to defend clients against foreclosure need to get out a message. Every person in foreclosure requires a competent legal defense; and an affordable legal defense is available. Most families in foreclosure believe they are helpless victims, overwhelmed by forces beyond their control. The foreclosure mills are posed to exploit this state of mind.

A different message needs to be published and widely disseminated. Most people today have learned that with the advances in modern medicine it is far better to treat a disease than succumb to it. The same principal applies to defense against foreclosure. Most people, however, are unaware that affordable “treatments” for foreclosure ailments are available.

There are many public spirited people, including members of the bar, who have selflessly given their times and work product to enable individuals to act pro se and represent themselves. In many places, people in foreclosure are invited to participate in symposia which are aimed at educating defaulting debtors regarding their rights and remedies. To the extent these programs educate the public about the choices and expectations relating to foreclosure of a home, they perform a valuable public service. The non-profit mortgage counseling conducted by HUD affiliated counselors is an excellent example of public education about debtor’s options and choices in foreclosure.

To the extent, these symposia try to empower a debtor to defend pro se against counsel from a foreclosure mill, the undertaking is an exercise in futility. The average homeowner is unable to effectively defend against a foreclosure in a judicial proceeding. Busy, overworked judges have no patience with quixotic tyros tilting against windmills.

4. Use asymmetric defense tactics to thwart foreclosure mills.

The profitability of foreclosure mill operations is a function of the number of cases resulting in uncontested foreclosure. For these operations, time is money. The less time allocated to successful adjudication of a case, given the fact that compensation is capped, the more profitable. Conversely, the more time required to prosecute a case, the less profitable it becomes. DCH’s motions to dismiss require opposing counsel to do extensive, time consuming legal research. A response will consume substantial legal resources and billable hours which are not billable.

In defending a foreclosure, every attorney should have an off the shelf, standardized discovery package. Where a mortgage is securitized, DCH is working on a discovery package of requests for production of documents, requests for admissions and interrogatories, motions to compel answers and production if required, document checklists and annotations and notes explaining why a specific document is required or question needs to be answered.

The ultimate goal is to bring down the cost of legal care, just like health care, to make it affordable to one and all.


DCH is respectfully calling for a change in foreclosure defense strategy by implementing the following tactics:

1. Employ generic defenses to make defense against foreclosure affordable to most of those facing foreclosure.
2. Proactively anticipate and address the concern of most judges regarding unjust enrichment if the debtor prevails in a foreclosure defense.
3. In an adversarial system the person sued is under a legal obligation to defend against the cause of action. Every person in foreclosure requires a competent legal defense; and an affordable legal defense is available.
4. Use asymmetric defense tactics to thwart foreclosure mills.

For more information contact:

Richard F. Kessler

Documentary Clearing House and Associates, LLC.


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