Foreclosures Hit Colorado Hard

January 2nd, 2008

The first three-quarters of 2007 have seen more foreclosures in Colorado than it did in the entire 2006 (a record itself). The state public trustees recorded a total of 28,960 foreclosures in the first nine months against 28,509 for the whole of last year.

Indications of difficult times ahead are obvious from the following figures- a whopping 66 per cent (i.e. two of every three) of home owners filing for foreclosure were unable to retain it as against 50 per cent losses for the last year. Last year the total foreclosure-auction sales numbered 15,112, whereas in 2007, it has already exceeded 19,025 in the first three-quarters.

In spite of legislative attempts to impede exploitative lending practices, employing task forces for foreclosure prevention and investing heavily in Colorado Foreclosure Hotline, the foreclosure filings are ever increasing.

These numbers could have been even worse if not for the existence of the hotlines. More people are being encouraged to visit the hotlines and according to Kathi Williams, director of Colorado Division of Real Estate, as many as 5,600 property owners have benefited from this move.

The lenders and the service providers who are now feeling the pressure of mounting unpaid and over due loans are initiating “workout” plans. The workout plans intend to preserve the borrower’s ownership over the property, but the time (three to four weeks) taken to endorse it causes a major setback. As more time passes, value of the property depreciates further and any deals made are likely to fall through.

Housing authorities in Colorado along with mortgage guarantors such as Fannie Mae and Freddie Mac and regulating agent such as Federal Reserve are pressurizing the lenders to authorize others to draft a workout plan.

According to Williams, although the lenders permit third parties to negotiate when initiating loans, they become totally inflexible while disposing them. Delegating counselors to workout plan for defaulting parties would not only speed up the process, it would be beneficial for all.

Within Colorado, Adams County continues to be the most affected area, with 4,540 foreclosures and 3,435 sales in the first three-quarter of 2007. The county registered one foreclosure filing for every 32 properties, Weld County was second with one in every 40 households and closely behind was Pueblo County with one per 41 properties.

A positive trend is that although the foreclosures are increasing, they are somewhat flatter, considering the previous quarters.