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The conventional wisdom since last fall is that the drop in foreclosure activity in Colorado and Denver wouldn’t last.
The double-digit, year-over-year drop in foreclosure filings was a result of well-publicized problems with paperwork, such as robo-signing of foreclosure documents. Once they were worked out, the state could expect another wave of people losing their homes, many observers predicted.
Still, the report by the Colorado Division of Housing released today, which showed a 27 percent drop in foreclosure filings, came as a surprise.
There were 8,115 foreclosure filings in the first quarter in Colorado, compared with 11,136 during the same period a year earlier, according to the report by the Colorado Division of Housing.
Foreclosures not roaring back
“Loan servicers (that process mortgage paperwork, and decide who gets loan modifications or face foreclosure) have been saying that once all of the paperwork problems were worked out, foreclosure filings would come roaring back,” said Ryan McMaken, the division spokesman who released the report and analyzed the data, which was covered earlier by InsideRealEstateNews.
“But they have been saying that since November,” McMaken said. “And I’ve looked at April numbers, and it appears they continue to decline. They’re not bouncing back so far.”
Foreclosures still high
While that is good news, the numbers are still high.
“Clearly, at this rate, it still will take us several years before we can return to what we would consider a normal foreclosure market,” McMaken said.
But the big question is whether the foreclosure crisis is going to get much worse, before it starts to claw its way back?
Short sales surge
Ron Woodcock, a broker with RE/MAX Southeast, said one reason that fewer homes may be entering the foreclosure process is because lenders are more willing to do short sales. In a short sale, a lender accepts less than the mortgage amount when the home trades hands.
“A lot more short sales are being done now than in the last year or last six months,” Woodcock said. “They are up dramatically.”
But the foreclosure crisis is far from over, he said. “We’re not coming out of this mess anytime soon.”
Shadow market lurks
Woodcock said that he things banks are sitting on a great deal of distressed homes that eventually will hit the market.
“We’re at a plateau right now,” Woodcock said. “But there is a huge shadow market out there that is going to greatly increase the inventory of homes on the market.”
Part of the slow-down is because loan mitigation officers in charge of processing and deciding the fate of distressed properties, are incredibly over-worked, he said.
Woodcock said he has talked to loan mitigation officers who have 700 to 800 cases they need to process.
Zach Urban, of the Adams County Housing Authority, said while the recent drop in foreclosure filings may be the “eye of the storm, before we experience a dramatic increase in filings,” he will take it.
“I’m just enjoying the holiday, even it is only a temporary reprieve,” he said.
Urban said that much of the financing for housing counselors is drying up or being curtailed. That will mean if there is another surge in filings, there will be fewer counselors to help homeowners in danger of losing their homes, he said.
Foreclosure bill to be re-introduced
Earlier, a bill that Urban put together to charge banks a fee for each foreclosure sale it processed to fund counseling, died in a committee, despite its support from the banking industry. Urban said a similar bill will be re-introduced next year. Urban also has met with lenders to see if they would pay the fee on a volunteer basis.
“We’ve met face-to-face with a number of servicers, and no one has said “no” yet,” Urban said.
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