As a tenant you can take the owners to court and sue them in civil court as they clearly weren't using your rent to pay the mortgage. However, as a tenant you have no rights with the lender.
As a tenant, the lender will evict you once the foreclosure is complete. They will most likely post a notice and you will have a period of time to get out. They cannot come and remove you with force, but most lenders will offer you cash for keys. Typically the starting rate is $200 per occupant and I've seen it go up as high as $500 per.
You will have to move your stuff out and whatever is left behind will be trashed. The amount charged to the lender for trash removal will be placed on the balance of what the borrower owes the bank on account of their default.
In the event the house is sold at foreclosure sale to a third party (meaning the bank themselves do not own it) then the third party is within his/her right to evict you as well. Again, as a tenant you have no rights to stay there. However, as a tenant in CO you can (as far as I've witnessed myself) take the landlord to court for damages, you have been damaged.
Foreclosure in CO:
Colorado foreclosures primarily are non-judicial foreclosures. Meaning, they do not go through the same judicial process that states such as New York will go through. In judicial states the courts are heavily involved from filing a complaint, to allow time for an answer, having the judgement entered etc. This means that in NY, NJ, etc you can actually drag the foreclosure process out quite a bit.
In CO however the foreclosure process (if I recall) is the lender must file for a notice of demand (much like a notice of intent to foreclose). This notice must also be published in a newspaper that reaches the entire county. The posting in the newspaper must happen once a week for 5 weeks I believe. The borrower is also mailed a notice just after the publication period begins.
A notice of sale is also published and must be done so no less than 15 days prior to the sale date.
The foreclosure sale must take place 45-60 days after the notice of demand (I think I have that name slightly off) is filed. So, say for example you owe your 7/1/2008 payment (this is probably the case for your landlord). Your lender will most likely give up on loss mitigation efforts after 60-90 days. Let's say 90 days because lenders are trying to play it safe. This is assuming your landlord has done nothing to prolong the default period by claiming they'll pay, repayment plans, etc. So now 90 days out is 10/1. The foreclosure probably started between 10/1 and well, yesterday. My guess is you have no less than 5 weeks and not much more than 8; safely. Once the foreclosure is completed you can give yourself a good month to go back and forth with the lender regarding evictions, cash for keys, etc. But you're going to have to move regardless. If the house is bid on at foreclosure sale (as stated previously) and a third party buys the house then they can evict you and they'll probably be slightly more aggressive. Alternatively, the third party may have purchased this as a rental anyway and you may be able to stay and just start paying that third party rent.
Your parents can also bid on the house themselves if they're so inclined.
The better news
Colorado is a redemption state. Meaning, there is a period of I think 75 days after the sale date where the borrower can redeem the property. In order to do this however they must pay the sum of the loan, fees and costs in full. They have until the 50th day (check that to be sure) to notify the lender of their intent to redeem.
Colorado foreclosures can be done judicially if the deed of trust is absent of certain verbiage that would otherwise allow for a non-judicial process to take place. Lenders most likely would prefer non-judicial foreclosures over judicial foreclosures because there is just yet another road block to getting what they need to get done within the allowable timeframe. However, if the deed of trust is lacking that language regarding the power of sale then the foreclosure must be judicial. More fees, more time, more headache for everyone.
