Just to clarify previous responses. If first mortgage holder bids at the auction, and wins the auction, they get a "Certificate of Purchase". Junior liens are given redemption rights, provided they have filed a notice with the Public Trustee. Second lien gets 10 days; third and subsequent liens get 5 days each, for redemption. To redeem, they must pay off any lien holders senior to them, and they obtain 'certificate of purchase'. After all redemption periods have expired, whoever holds the CP gets deed to the property.
The foreclosure process severs the debt FROM the real estate collateral. However, IT DOES NOT ABSOLVE THE BORROWER OF THEIR DEBT! The Lienholder may secure a Judgment against the borrower personally for the deficiency, fees, etc. If the Lienholder opts to 'write off' the deficiency, the borrower may receive a 1099 for the amount of the deficiency, as 'debt relief' is a taxable event.
When dealing with a property in foreclosure, either as buyer or seller, it is vital to work with an Agent knowledgeable and experienced with the laws, regulations, and procedures which govern these transactions.

In Colorado, any subsequent lien holder is out of the picture and has no claim to the property after the public sale. There are some provisions in the new Colorado foreclosure law that allow for the additional junior lien holders to have an opportunity for redemption, but once the sale is done, they are out of the picture for that property. ... but not necessarily for that borrower.

In a forclosure auction the second mortgage is wiped out, the lien comes off the property and the second mortgagee will go after the home owner to get paid. Hope this helps