Bracing for what liens survive foreclosure

Hoping the foreclosure takes the whole mess down with it.

The mortgage was supposed to be the whole story. A foreclosure and that is it. Nothing else. Then a title report, a payoff call, or an old memory surfaced, and the house turned out to have more following you. A contractor. A court. Panels on the roof you are no longer sure you own. You had made a kind of peace with the house being the price. What you cannot make peace with yet is not knowing whether the price covers everything, or whether a second line forms behind the bank once the house is gone.

The order they landed on the house decides it

In Colorado, when a foreclosure sale finishes and title passes to the winning bidder, that title comes free and clear of every junior lien to the one that was foreclosed (CRS 38-38-501(1)). Junior is the whole word. The statute wipes what sits below the foreclosing loan and does not touch what sits above it. So a first mortgage foreclosing clears the second mortgage, the HELOC, and most of what came after. A second mortgage or an HOA foreclosing leaves the first mortgage exactly where it was.

Below or above is mostly a matter of dates. Colorado ranks claims on a home by the order they were recorded with the county, and an unrecorded claim does not even hold against someone who recorded first (CRS 38-35-109(1)). For most homeowners, the first mortgage was recorded the day they bought the house. Nearly everything that stuck to it afterward, in the years that went wrong, sits below that loan. That is the quiet good news inside the rule. Most of the pile you are inventorying is junior, and junior is what the sale clears.

If you found this mid-sale instead, one honest note. That clearing belongs to the foreclosure sale alone. A sale you run yourself does not wipe anything. Every claim on the house has to be paid or released at the closing table, which is exactly why a pile like this can show up between you and a clean closing.

The ones the house carries out with it

Now the survivors. What they share is not size. They were there first, or the law simply seats them first, and they survive by staying on the house.

• Unpaid property taxes: A perpetual lien ahead of every mortgage and every other claim until paid in full (CRS 39-1-107(2)). The foreclosure does not touch it, and it does not hand it to you. It goes to whoever holds the deed next.
• A PACE assessment: the furnace, roof, or windows financed through a program that read like a utility bill. It reads that way because it is written as one: a special assessment on the property, not a loan with your name on it. It exists because you applied and signed (CRS 32-20-104(1)), it ranks ahead of everything except the taxes (CRS 32-20-107(1)), and your lender consented in writing before it could sit ahead of the mortgage. It is bolted to the house. Where the house goes, it goes.
• Six months of HOA dues: Most HOA debt sits in the junior stack and comes off with it. But up to six months of regular assessments outranks even a first mortgage recorded years earlier (CRS 38-33.3-316(2)), and that slice rides through.

The contractor's lien, smaller and shorter than it looks

The mechanics' lien is the one most people here are carrying, so let me size it. A contractor's lien does not take its place in line from the day it was recorded. It reaches back to the day work began on the job, and it outranks anything that landed on the house after that day. What it cannot do is leapfrog a mortgage that was already recorded before the work started (CRS 38-22-106(1)). For a house bought years before the repair, that puts the lien below the mortgage. Junior. When the mortgage forecloses, it is cleared off the house with the rest.

It is also short-lived. A mechanics' lien cannot hold the property longer than six months after the last work or the completion of the job unless, inside that window, the contractor both files a foreclosure lawsuit and records notice of it with the county (CRS 38-22-110). If the job ended more than six months ago and no suit was filed, the lien may already have let go of the house on its own. But one honest edge: the unpaid bill underneath that lien stays between you and the contractor.

The judgment lets go of the house and holds onto you

A judgment lien behaves the same way on the house and differently on you. A money judgment only becomes a lien on your home when the creditor records a transcript of it with the county, and from that day it attaches to real estate you own there (CRS 13-52-102(1)). Recorded after your mortgage, it is junior, and the sale clears it off the house. Left alone, the lien also expires six years after the judgment unless the creditor revives it.

Now the part I will not soften. The lien was only the judgment's grip on the house. The judgment itself is a court order that you owe money, and it belongs to you, not the address. A Colorado district court judgment can be enforced for twenty years from the day it was entered, and revived to last longer (CRS 13-52-102(2)). So this is the one that lets go of the house and keeps hold of you. It is a debt now, not a lien, and it is bound. But it walks out the door with you.

The panels were never quite the house's

The solar panels are the strangest piece, because they were never quite the house's and never quite yours. A leased system, or one under a power purchase agreement, belongs to the solar company. Under Fannie Mae's rules for home loans, leased panels are not even counted in the home's value, and the company commonly records a filing against the property just to announce that it owns the equipment. That filing announces who owns the panels. Nothing else.

What the foreclosure does to the panels is written in the lease itself. Those same rules require a solar lease on a financed home to spell out the lender's choices if it ever takes the house: end the lease and have the company remove the panels, step into your lease as the new customer, or sign a new one on terms no worse than yours. Which of those happens is the lender's call, not yours.

Knowing what walks out with you

You came here taking inventory of everything stapled to a house you are about to lose, hoping the loss would at least be complete. Most of it clears with the house. A piece or two keeps your name, and now you know which. That is a hard thing to have sorted alone, and you did it. If the house is still yours today and you want to see what is possible before any of this is decided, we at Transitus can show you your options.

This article is general information from Transitus, not legal, financial, or tax advice. Foreclosure rules change and every situation is different. Transitus is not a foreclosure consultant (CRS 6-1-1103) and charges no upfront fees. For free help, call the Colorado Foreclosure Hotline at 1-877-601-HOPE or consult a Colorado real estate attorney.