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Colorado far off Top 10 list for foreclosures


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  • RealtyTrac releases April foreclosure report.
  • Colorado’s ranking improves by 25 places.
  • Is the foreclosure crisis over? 

There has been nothing remotely funny about Colorado frequently landing on a Top 10 list it never wanted to be on.

At long last, a nationwide foreclosure report released today by RealtyTrac shows Colorado is not only off that list, but isn’t even close to being one of the states plagued by a high rate of homeowners losing their homes.

Colorado in April ranked No. 36 for its foreclosure rate, according to RealtyTrac.

In April 2012, it was No. 11 and for a time Denver was even ranked No. 1, when it was struggling with foreclosures before the rest of the country was gripped by the foreclosure web that trapped millions of consumers, costing them their homes.

“Well, this is a big day for us,” said Ryan McMaken, who releases his own foreclosure report as the economist for the Colorado Division of Housing, using a different methodology than the California-based RealtyTrac.

“Since about 2007, Colorado has essentially been in the top 10 for a good portion of the time,” McMaken said. “To suddenly see such a significant drop is interesting and very significant.”

RealtyTrac showed one out of every 1,896 households in Colorado being in some stage of the foreclosure process, from the initial filing to the REO, or real estate owned, when the lender takes back the home.

That is less than half the national average of one out every 905 households in some stage of foreclosure.

McMaken said the April RealtyTrac report is in line with other national report on mortgage delinquency rates released by groups such as Lender Processing Services and the Mortgage Banking Association.

“MBA reports for quite some time have put Colorado and Denver past the middle and more toward the bottom of the rankings, if you will,” McMaken said.

“We would be more toward the ‘least bad,’ states, with maybe only 12 or 15 states doing better than us,” he said.

Undoubtedly, the rising housing market is playing a big role in Colorado’s improvement in the RealtyTrac rating.

“With rising prices, there is less need to go the short-sale route,” he said. In a short sale, the lender agrees to accept less than the mortgage balance.

“Clearly, given the low inventory, low interest rates and increased sales, prices are up substantially,” McMaken said. “While that can’t go on forever, in today’s market, many more people who can’t afford to pay their mortgages, can at least sell their homes for an amount equal to their debt.”

Lenders, he said, also are being much more cautious and are making loans to better qualified borrowers, while many of the bad loans made during the go-go days have worked their way through the system.

His own data, he said. has reflected a dramatic drop in foreclosure activity in Colorado and the Denver area.

“For the last four or five months, we have been seeing improvements and hitting lows that we haven’t seen since the foreclosure crisis began,” McMaken said.

Is the foreclosure crisis over in Colorado?

Barring some macro issue that could cause unemployment to rise dramatically, it may be fair to say the state’s foreclosure chapter has closed, he said.

“There is still so much uncertainty with global issues and sovereign debt problems that something could happen to drive unemployment up and damage the economy,” he said that could cause another jump in foreclosures.

“The other thing is that if interest rates would suddenly skyrocket, a lot of people who still have adjustable rate mortgages would be in a lot of trouble, leading to another round of foreclosures,” McMaken said.

“So many people have benefitted from rock-bottom rates, they are holding on to ARMs, even if they could refinance into historically low-interest rates. But because the Fed has not signaled it is going to stop buying bonds and mortgage-backed securities, there doesn’t seem to be much danger of rates rising at this time.”

McMaken said that Colorado appears to be recovering at a faster clip than in many states.

“I don’t think every part of the country is showing the improvements that we are seeing here in Colorado and Denver,” he said. “According to RealtyTrac, last month Colorado showed a 68.75 percent drop in foreclosure activity from April 2012, more than twice the national improvement of a 33.3 percent drop.

From March, Colorado showed a 34 percent drop, far exceeding the 5 percent drop for the nation.

“The April numbers indicate that the pig is moving through the python when it comes to deferred foreclosures in judicial foreclosure states,” said Daren Blomquist, vice president at RealtyTrac.

“Foreclosure starts have been increasing for several months in many of the judicial states, and now that increased volume is showing up in the second stage of the process: the public foreclosure auction,” he added.

‘’Scheduled foreclosure auctions in judicial states jumped to a 30-month high in April, evidence that lenders are serious about moving forward with completing the foreclosure process — either through repossession or sale to a third-party investor at public auction.

“Meanwhile, foreclosure starts are bouncing higher in a handful of non-judicial states where servicers are adjusting to legislation designed to prevent improper foreclosures,” Blomquist added.

“This includes Nevada, Washington and Arkansas, where foreclosure starts have been increasing on an annual basis since late 2012, along with Oregon and California, where foreclosure starts are still down from a year ago but have been moving steadily higher in recent months.”

Nevada had the highest foreclosure rate, with one out of very 360 households being in some stage of foreclosure.

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Have a story idea or real estate tip? Contact John Rebchook at  JRCHOOK@gmail.com. InsideRealEstateNews.com is sponsored by Universal Lending, Land Title Guarantee and 8z Real Estate. To read more articles by John Rebchook, subscribe to the Colorado Real Estate Journal.