In Colorado, homeowners or other parties involved in foreclosure proceedings have the right to “cure” certain defaults before a foreclosure sale occurs. This statute, § 38-38-104, outlines the process and requirements for curing defaults related to nonpayment or technical defaults under a deed of trust or other lien being foreclosed. Let’s break down this law to understand how it works and who is eligible to take advantage of this right.
1. Who Can Cure the Default?
Under this statute, several individuals and entities have the right to cure a default if they meet specific criteria. Generally, those who can cure include:
- The property owner as of the recording of the notice of election and demand or lis pendens.
- Heirs or representatives if the owner is deceased or incapacitated.
- Co-owners of the property who have an interest in the property recorded in the public records.
- Transferees of the property (such as the property owner’s spouse or an entity controlled by the property owner), as long as their ownership is recorded.
- Holders of a court order that transfers title to the property to someone other than the original owner.
- Anyone liable under the evidence of debt, such as borrowers or cosigners.
- Sureties or guarantors of the debt.
- Junior lienholders or those with a lesser interest in the property, such as lessees or easement holders, as long as their interest was recorded before the notice of election and demand.
Additionally, if the lien was recorded incorrectly in the wrong county, a person may still have the right to cure if they re-record the lien in the correct county.
2. How to Cure the Default:
To cure a default, the person wishing to remedy the situation must take the following steps:
- File a Notice of Intent to Cure: The person seeking to cure the default must submit a written notice of intent to the officer handling the foreclosure sale. This notice must be submitted at least 15 calendar days before the foreclosure sale.
- Provide Evidence of the Right to Cure: The filer must also submit evidence to show they have the legal right to cure the default, which may include documentation of ownership, a legal representative’s authority, or other relevant records.
3. Requesting the Cure Statement:
Once a notice of intent to cure is received, the officer handling the foreclosure must promptly request a cure statement from the holder of the debt (typically the lender or servicer). This statement details the exact amount necessary to cure the default, including any fees, interest, and other charges. The officer must request this cure statement at least 12 days before the sale.
The cure statement will include:
- The total sum needed to cure the default, including principal, interest, late fees, taxes, insurance, and attorney fees.
- A breakdown of the individual charges.
- A statement of the cure amount that will allow the party curing the default to prevent the foreclosure from proceeding.
4. Payment and Cure Timeline:
- Once the cure statement is provided, the person wishing to cure the default must pay all sums due as detailed in the cure statement. This payment must be made no later than 12:00 PM the day before the foreclosure sale.
- If the payment is made, the foreclosure sale is stayed, and the process will halt, provided the foreclosure holder agrees to withdraw or dismiss the foreclosure.
5. Updating the Cure Statement:
If there is a delay in curing the default, or if new amounts are added to the debt, the cure statement may be updated. If this happens, a new cure statement must be submitted with updated figures. Any discrepancies or changes in amounts must be communicated to the officer handling the sale within 10 days of discovery.
6. Failure to Cure and Foreclosure Sale Continuation:
If the cure is not made in time or the payments are insufficient, the foreclosure sale may proceed. However, if the holder of the debt does not file the required cure statement by the deadline, the foreclosure sale will be continued for at least one week. The sale can continue to be postponed each week if the cure statement is not filed, up to the limit prescribed by law.
7. Special Case: Technical Defaults (Non-Monetary Defaults)
In cases where the default is not related to nonpayment (for example, a failure to submit required documents such as tax returns or balance sheets), the person curing the default may provide the necessary documents to satisfy the lender’s requirements. However, all sums due under the debt must still be paid, and the cure process follows the same steps as for monetary defaults.
8. Reinstatement and Interest Charges:
If the cure is successfully completed, the foreclosure process is halted, and the homeowner or other party who cured the default is treated as if the default had never occurred. However, the interest charged during any continuance of the foreclosure sale will be at the regular rate, not the default rate, provided that the cure is completed.
9. Documentation and Transparency:
All statements, receipts, and documents related to curing a default must be maintained and made available to the person who paid the cure amount. The holder or servicer of the debt must retain copies of all receipts and documents for at least 90 days after the cure payment.
Why the Right to Cure Matters?
This statute is essential because it provides homeowners and other interested parties a chance to stop the foreclosure process and retain ownership of the property. It creates an opportunity for them to address defaults—whether related to missed payments or other technical issues—before the sale of the property occurs.
If you are involved in a foreclosure in Colorado, understanding § 38-38-104 can be critical. Whether you are a homeowner seeking to save your property, a co-owner, or a creditor with a junior lien, knowing your right to cure the default can give you the opportunity to correct the situation before it’s too late.
For those considering using this right, it’s advisable to consult with a qualified attorney to ensure that the cure process is done correctly and within the prescribed time limits. This can potentially save a property from being sold at foreclosure and provide the necessary breathing room to resolve the underlying issues.
