Colorado foreclosure filings fall to 18-month low

At the end of this blog, vote on whether you think the worst is over as far as foreclosures.

There were 2,633 foreclosure filings in 12 of Colorado’s largest counties in May, a 17.7 percent drop from the 3,198 filings in May 2009, marking the lowest point in foreclosure activity in the past 18 months, shows a state report released today.

The report by the Colorado Division of Housing appears to be the strongest proof yet that the foreclosure crisis that has gripped the state for several years, is finally waning.  However, homeowners losing their jobs remains a dark cloud hovering over the state’s housing market, which could mean that thousands of homeowners will still suffer the pain of losing their homes.

Still, the latest numbers are encouraging.

Surprisingly good news

“I would say it is good news,” said Ryan McMaken, of the Colorado Division of Housing, and author of the report. “It is waning. As far as new foreclosure activity, there is a slow decline.”

McMaken had predicted decline, based on previous foreclosure patterns, an improving housing market, and government and lender programs that that provide help for people about to lose their homes.

“But I was surprised how low the numbers were,” McMaken said. “You could say it was unexpectedly low. The trend, going back to April of last year, overall, has been to go down.”

In the first five months of the year, there were 15,330 foreclosure filings, a 6 percent drop from the 16,310 filings from January to May of 2009.

“That may be more reflective what is happening the market and give a more realistic and accurate portrayal of the market than 18 percent drop from May 2009 to this May,” McMaken said.

Foreclosure sales at public trustee auctions, meanwhile, rose 18.3 percent to 1,459 in May from May 2009, when there 1,233, although they fell 19.2 percent from April, when there were 1,806. Sales represent homes that went into foreclosure many months – and even years – before the home returned to lenders. And the year-over-year difference partially reflects the low number of foreclosure sales that occurred last spring due to last year’s voluntary moratoria on foreclosures, McMaken noted.

Bad economy, not bad loans, the culprit

Zach Urban, of the Adams County Housing Authority, said the bad economy, and not bad loans are driving foreclosure activity today.

Urban researched foreclosure activity in Adams County and found that it was taking an average of 32 months from the the loan originated until the home went into foreclosure. “You have to put this into context,” Urban said. “You can’t have foreclosures, if you don’t have loans. You can’t have a forest fire if you do not have enough fuel to keep the fire growing.”

When Ron Woodcock, a broker with RE/MAX Southeast came to the Denver area from Florida, almost all of his clients were people who could not afford their mortgages, which were adjusting upward. Those loans, such as option-ARMs and other subprime mortgages, have largely worked their way through the system.

“Now, I am working on 17 short sales and every single one is because the homeowner lost their job,” Woodcock said. A short sale is when a lender agrees to accept less for the home than the outstanding mortgage.

Help coming for those who lost their jobs

That is the experience of HUD counselors who man the phones at the Colorado Foreclosure Hotline, said Stephanie Riggi, who manages the hotline at 1-877-601-HOPE..

“A high number of our calls are from people who have decent, fixed-rate mortgages,” Riggi said. “They have lost their jobs or they are suffering from reduced income.”

She noted that the original government programs weren’t designed for homeowners who lost their jobs, but rather to provide assistance to people saddled with loans that were spiralling well above what they could afford, at a time when their home values were dropping.

“But new programs addressing people losing their jobs will go into effect on Aug. 1,” she said. “These are called forbearance programs for people facing financial hardships.’

Broker Woodcock said that homeowners in jeopardy of having trouble making their mortgage payments, should not try to deal with it alone. “There are so many resources available at no cost to people,” Woodcock said. “People who try work it out themselves, are probably setting themselves up for failure. Your much more likely to get some help if you talk with a HUD-approved counselor.”

And Shannon Peer, director of counseling at the non-profit Brothers Redevelopment Inc. in Edgewater, said that it is too early to say that the we have won the war against foreclosures.

“We are still facing such a high level of foreclosures, it is going to b a long period before we are out of the woods,” Peer said.

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