John Rebchook is a former Rocky Mountain News reporter with more than 30 years of experience in writing and communications... Do you think the worst is over? Vote at the end of this blog
Colorado’s foreclosure crisis has hit bottom, and most states are in worse shape than in Colorado as far as homeowners losing their homes, according to an in-depth analysis of the latest Mortgage Bankers Association data by Ryan McMaken of the Colorado Division of Housing.McMaken’s analysis of the MBA data shows that Colorado has the 14th lowest foreclosure inventory in the nation. Colorado was one of the first states to be hit by the foreclosure crisis, and before 2008, often had one of the highest foreclosure rates in the nation. Colorado is now in 36th place, according to McMaken’s analysis.
“Clearly, we have hit bottom,” McMaken said on Friday. “But the number of filings are still going up and there is still so much fragility in the market that we don’t want to be over-confident. Anything can happen. But the trends we are seeing so far have been good.”
Colorado foreclosure rate lower
The percentage of Colorado mortgage loans in foreclosure fell to 2.53 percent int the fourth quarter, according to the latest MBA information, compared to the national average of 3.63 percent. Even on a national basis, the foreclosure rate is down from its all-time high of 5.02 percent in the first quarter of 2010. The 28 percent drop from the national high is so significant that “we have clearly turned the corner,” said Jay Brinkman, MBA’s chief economist. Although delinquencies and foreclosure rates remain above the historical norms, he said “the delinquency picture should continue to improve,” this year.
And Colorado “continues to improve faster than the nation with its delinquency rate,” said McMaken. He also analyzed third-quarter delinquent mortgage data from the MBA and “the same trend held up . Colorado held up better than the nation.”
RealtyTrac data questioned
One of the reasons that McMaken looked at the data because he questioned whether Colorado truly has the 10th worst foreclosure rate in the country, as RealtyTrac data consistently shows. RealtyTrac, based in Irvine, Calif., uses a different methodology than the MBA. RealtyTrac combines every aspect of the foreclosure process from the first filing to the REO (real estate owned) property, following the public trustee auction. The MBA tracks loans that are 30, 60 and 90-days delinquent. After a homeowner hasn’t made a payment in 90 days, banks can begin the foreclosure process.
“One of the reasons I wanted to analysis this information is because I wanted to do a reality check on RealtyTrac,” McMaken said. “I don’t see (how ranking Colorado in the top 10 states) can be true. Clearly, 35 or so other states are in worse shape than in Colorado. Even as the nation as a whole is off its peak, we are no place near our peak set in 2007.”
Foreclosure inventory rising due to processing delays
However, the total foreclosure inventory in Colorado is rising, but that is largely because of a delay in homes being processsed of in the wake of “robo-signings” and other bookkeeping snafus by big banks, McMaken said.”We think the inventory is rising because we still have new foreclosures being added, but banks are just leaving them there. They are just sitting. We think the increased inventory signals that they have stopped moving their inventory until they can resolve all the robo-signing type of issues.” Still, the total inventory of foreclosed homes is down almost 10 percent from its peak reached at the end of 2009, he said, while nationally the overall foreclosure inventory hit a new high that is 1.1 percent higher than the previous record set in the first quarter of 2010.
Colorado better than U.S. by almost any metric
Yet, it is clear the the number of new distressed loans in Colorado “are accelerating downward faster than across the nation. Nationally, loans that are either in foreclosure or 90 days delinquent are down 11.4 percent from their peak, while in Colorado they are down 15.7 percent from their peak, McMaken’s analysis shows.
That means that fewer Colorado homes will enter the foreclosure process than in recent years. “What I am hoping is that for the foreseeable future that means we will see the number of new filings going down. Then, it would seem inevitable that the foreclosure inventories would go down. I am always worried that the number of filings could go back up. But we should have some warning, if we start seeing a jump in 30-day and 60-day delinquencies.”
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I would lump foreclosures and short sales together. They turn homeowners into renters and depress home prices. I would bet short sales have risen while FC have stabilized.
Short Sale will be the new method of converting mortgagors out and new mortgagees in, we are using several models that are being used in AZ and NV…this will be harder to track on the “Foreclosure” radar, there is a HUGE NED- Short Sale inventory building up with the fact that loan mods are a SCAM put on by the government.
Jobs are not growing and I agree with Joe
that short sales = foreclosures! Anyone reporting that obvious, ugly little truth on how many realtors/mortage brokers are being forced out of the business every month? Cream rises to the top and 90/10
rule is playing out……….
Short Sales on the rise, due to banks working with homeowners and the new HAMP law that became effective 2.1.2011 – this brings foreclosures down and Short Sales up.
The bank is also holding off on NEDs. I have a real estate customer who is 9 months behind and still hasn’t received it.
Continued upticks in fuel prices may be the next driving factor for new defaults striking commuters and rural residents then working into the blue collar workforce.
I agree @Joe – I hope that we/the media are not going to/starting to use the term short sale as a more user-friendly version of “foreclosure”. I have read an increasing amount of articles that seem to interchange the two in an alarming and misleading way. I wish the media could focus more on letting buyers know what a great opportunity these foreclosures/short sales can be as “fixer uppers”. There are some GREAT deals on foreclosures out there but buyers have to weed thru so many spam/garbage sites full of inaccurate information and hidden fees that seem to be geared towards less savy buyers. Every article/blog post I see that mentions foreclosures/distressed homes compel me to remind people that mortgage insurance for the FHA 203k loans are going to increase on April 17th. The FHA 203k loan was created to renovate homes like the sea of foreclosures that are now available.