Counselors at the Colorado Foreclosure Hotline have prevented more than $4 billion in mortgages from slipping into foreclosure sales since it was launched less than four years ago.
Based on an average loan size of of $188,349, since the hotline was launched in October 2006, HUD-approved housing counselors have helped 21,530 of 23,48 clients they have met in person, about a 92 percent success rate with those who have completed the counseling process.
Dollar value even surprises insiders
The $4 billion figure may surprise people.
“It surprised us,” said Stephanie Riggi, manager of the hotline. “We did the math and we knew it was going to be a big number, but not the magnitude of it.”
Riggi said that one of the immediate benefits, in addition to the homeowners, is to the lenders, which held the loans that were in danger of taking back. Foreclosures are very expensive to banks.
“”That’s $4 billion in bank loans that were kept off their books as bad loans,” she said.
Finger-pointing played down
Riggi said one reason that the hotline has been successful, is that it is a collaborative effort with a large number of players.
“We work together,” Riggi said. “It’s easy to point fingers or blame everyone from the homeowner to the lenders. But instead of assigning blame, what we do is try to resolve the issue. That means homeowners, lenders, Realtors, and government entities, like the Colorado Division of Housing, are all working together.”
“That is excellent news,” said Ryan McMaken, of the Colorado Division of Housing, which helped launch the hotline at 877-601-HOPE, which has been heralded as the first of its kind in the country, as well as one of the most successful in the nation.
“To put that $4 billion in perspective, the median price of a home in Colorado is about $200,000, so by that measure it is the equivalent of keeping 20,000 of homes out of foreclosure,” McMaken said.
That is about the equivalent of every house in a city the size of Littleton.
“Another way to look at it, $4 billion it is about 60 percent of the $7 billion discretionary Colorado state budget,” McMaken said.
Other comparisons to help you get your arms around $4 billion: You could buy 8 million Ipads, or 1.4 million top-of-the-line Prius’s, or 139,178,885 shares of BP with the money.
Keeping homes out of foreclosure, of course, is an immediate benefit to the homeowners in question. But the over-all impact is more far-reaching.
For one thing, it will help stabilize home prices in Colorado, compared to other states, said economist Patty Silverstein, of Development Research Partners.
Other states in worse shape than Colorado
“I think when the final analysis is done, and Colorado fared better than most states in maintaining values during this housing crisis, the long-term affect could to make Colorado more attractive to lenders and cheaper rates for consumers,” McMaken said. “Clearly, there already is a large benefit to the financial institutions that hold these loans in their portfolios. Now they have performing loans.”
But that doesn’t mean that the original homeowners are still in the homes. Increasingly, more of these homes are ending up as short sales, in which the lenders take less than the mortgage amount.
Still, just getting lenders to work with borrowers is a big improvement, McMacken said.
“If you go back to 2006 and 2007, financial institutions were very reluctant to do any kind of loan modification program,” McMaken said. “It used to mystify us why they seemed willing to let the home fall into foreclosure, which was a very expensive proposition, rather than modify the interest rate and continue to make money on the loan.”
Part of the reason likely has to do with accounting rules, which forced banks to immediately take a loss on the difference between the original interest rate and the lower one. Also, McMaken notes that banks did not have loss mitigation workforces in place to deal with the huge volume of distressed real estate, as this was the first nationwide housing price collapse since the Great Depression.
Also, federal housing programs such as the Making Home Affordable Program were not yet in place.
Hotline a national model
Ron Woodock, a member of the Colorado Foreclosure Prevention Task Force and the Colorado Housing Counselor Coalition, said that the hotline is a model for other states.
“I often talk about how I came here from Florida, and I still don’t think Florida has a hotline like this, even though the foreclosure problem there is many, many times worse than here in Colorado,” said Woodcock, a broker with RE/MAX Southeast.
Woodcock said he doesn’t think that many people are aware of the $4 billion impact of the hotline. And some people in real estate and mortgage industries privately are skeptical that the hotline is providing the punch it claims.
“This has been one of the beefs I have had with people,” Woodcock said. “An amazing amount of people do not think that the foreclosure impact has had any impact or should even exist. That’s a bunch of crap. The truth is, it has been amazing. I have been involved with it since its inception in 2006 and I have been up to my eyeballs with every aspect of the housing crisis in Colorado. I have to tell consumers: Don’t try to do it on your own. Call the hotline and speak with a HUD-counselor. If you don’t, good luck. You will be thrown into the lion’s den.
The Colorado Foreclosure Hotline can be reached at 877-601-HOPE. It is managed by Brothers Redevelopment in Edgewater.
Contact John Rebchook at JRCHOOK@gmail.com or 303-945-6865