Douglas County latest casualty of market in Q1

Foreclosures. They’re not just for low-priced homes anymore.

Douglas County, one of the richest and fastest-growing counties in the nation, is seeing on average one $1 million home go into foreclosure each week.

“I haven’t seen any $2 million homes yet, but I definitely have seen homes pushing $1.5 million,” said Dianne Bailey, the Douglas County public trustee.

She said that the homes are mostly speculative – those built without buyers – constructed by custom-home or larger builders.

“These are typically developer-built homes that have never been sold,” she said. “They are not typically owner-occupied homes.”

It’s not just Douglas County where expensive homes are going into foreclosure. Bailey noted that none of the homes in last year’s Parade of Homes in Arapahoe County has sold, and one is in foreclosure.

Bailey said most of the houses entering foreclosure in Douglas County are in the $300,000 to $350,000 range, while in the past they had been in the $250,000 to $300,000 range.

Bailey blamed adjustable rate mortgages moving upward for the increase in expensive homes going into foreclosure.

In the first quarter, foreclosures in Douglas County jumped 78 percent, the largest increase from the same period a year earlier, according to a report released Thursday by the Colorado Division of Housing.

There were 665 foreclosures in Douglas County in the first quarter, compared with 373 a year earlier.

Statewide, foreclosure filings were 23 percent higher during the first quarter of 2008 compared with a year earlier, according to the division.

Overall, 11,630 new foreclosures were filed during the first quarter, compared with 9,443 for the same period last year. There were 39,915 new foreclosure filings reported during 2007.

That equates to one foreclosure filing for every 159 households. Adams County had the highest foreclosure rate with one foreclosure filing for every 86 households, while Weld County showed one foreclosure filing for every 102 households.

Mike Rinner of the Genesis Group, which tracks housing along the Front Range, said he isn’t surprised that expensive homes in Douglas County are increasingly being foreclosed on.

“The lower end of the market is still the most hit by foreclosures,” Rinner said. “But if you can’t sell your lower-end home, it puts you at a disadvantage to move up. It means there are not as many new-home buyers. It’s a reverse snowball effect, if you will. Or a trickling up of bad news, instead of a trickling down of good economic news.”

He noted that when a home just begins the foreclosure process, the owner, not the lender, can still try to sell it.

“Any good broker will tell you that if a home is priced right, it will sell,” Rinner said.

He said some builders may have been trying to sell a house for $1.2 million that cost them $900,000 to build and until the foreclosure were unwilling to budge on the price.

“The lender starts the foreclosure to protect itself, and the builder gets a reality shot,” Rinner said.

Independent broker Gary Bauer also said he isn’t surprised that more expensive new homes are going into foreclosure.

“Builders who have been trying to scrape by are now getting caught,” Bauer said.

Statewide, foreclosures likely will continue to rise this year but not as rapidly as in past years.

According to the housing division study, foreclosure filings for 2008 are likely to be 15 percent higher than record 2007 totals. Foreclosure filings increased 30 percent during 2006 and 40 percent during 2007.

“We’re glad to see a break in the rate of increase in new foreclosures opened,” said Kathi Williams, director of the Colorado Division of Housing and co-chairwoman of the Colorado Foreclosure Prevention Task Force.

“What we’d really like to see is a drop in the total number of new foreclosures this year. However, adjustable rate mortgages will continue to reset through 2009, and the cost of living looks like it will continue to increase this year. That will likely mean we won’t see any drop in foreclosure numbers this year.”

rebchookj@RockyMountainNews.com or 303-954-5207

By: Rhonda Moore, Staff Writer

Whispers about a coming recession began in one industry widely considered the benchmark of economic indicators – the housing market. With home sales down, prices stalled in markets from coast to coast and new starts at a standstill across the Front Range, Colorado is no stranger to the effects of the housing crunch.

And hand-in-hand with the housing fallout is the most dreaded f-word of all – foreclosure.

Ranked fifth in the nation in foreclosures, Colorado’s public trustees in March 2008 saw 3,954 public notices for foreclosure, according to RealtyTrac.com, a company that tracks foreclosure statistics across the nation. That same month, 2,191 properties were listed as bank-owned properties – a slight decrease from the previous month for the state, but part of a 57 percent increase in nationwide foreclosures from the same time last year.

In Douglas County, public notices for foreclosures during the four-week period ending in mid-April increased 28 percent. For a county where the median household income increased 5 percent between 2005 and 2006 and demand for emergency housing assistance at a steady rise, the numbers are part of what one public agency calls “the perfect storm.”

In Arapahoe County, the public trustee’s office posted 6,225 foreclosures in 2007 and is facing a year-to-date increase of more than 60 percent. Publicly-noticed foreclosures through March 2007 were 1,151; the number of foreclosures published through March 2008 is 1,851.

The foreclosure storm chasers in Colorado comprise an array of public agencies primed to assist homeowners who are either in foreclosure or at risk of foreclosure.

Colorado Attorney General John Struthers began the mortgage consumer fraud task force, providing foreclosure prevention forums, housing counseling and foreclosure and homeownership counseling through its foreclosure prevention hotline.

The County of Douglas joined the fight with a foreclosure mediation program offered since July 2007 through the Douglas County housing partnership.

The agency in the past has provided housing and emergency assistance to low- and moderate-income residents, but with 1,642 foreclosures filed in the county in 2007, finds the demand for assistance with foreclosure at an all-time high. The agency anticipates the county is on track for about 2,500 foreclosure filings in 2008, said Travis Anderson, single family programs manager.

The foreclosure mediation program provides counseling and mediation services to homeowners who are facing foreclosure and May 6 will begin bi-monthly foreclosure workshops free to the public.

The program guides clients through the process of contacting the lender to attempt to mediate a payment plan, providing assistance with phone calls, review of payments, hardship letters and other correspondence, much of which is beyond the client’s scope, Anderson said. The ultimate goal is to restore the loan to a healthy balance or assist with an arrangement to help keep the foreclosure off the client’s credit record, he said.

In some cases, an arrangement could be a short sale or simply walking away from the house and signing the deed back to the lender.

Regardless of the final solution for foreclosure clients, from the moment they pick up the phone to make the first call for assistance, time is of the essence.

“We would love to get people even before they go into foreclosure – maybe when they’re one month or less than two months behind,” Anderson said. “The sooner they come to us, the better position we are in to work with the lender.”

About half of those who contact the foreclosure mediation program are players in the “sub-prime” mortgage market which included adjustable rate mortgages that adjusted at nearly double the original interest rate, stated-income mortgages where the lender did not verify the borrower’s income and other “bad loan decisions” on the part of the borrower and the lender which boiled down to borrowers who simply “bit off more than they could chew,” Anderson said.

The other half of the program’s clients face a life-changing situation such as divorce, job loss, health issues or a simple shortfall in the face of the rising cost of living, he said.

Most clients who call the foreclosure mediation program do so only at the end of a long, embarrassing and, in many cases, secretive road with no end in sight. Many callers are timid or nervous and are making their first phone call for help, Anderson said. Most have yet to share their “f” secret with a family member and in some instances, the caller declines a return phone call. A phone call to the family home might tip off a spouse who still is in the dark.

“As you can understand, it’s a very private situation,” Anderson said. “It’s very personal.”

Regardless of where the finger-pointing begins or ends – whether taking into consideration the homeowner who loses grip on the American Dream or the lender left holding an asset worth a fraction of the loan – the one paying the highest price for the foreclosure twister is none other than the American taxpayer, Anderson said.

The county’s housing partnership oversees $800,000 each year from the division of housing and urban development for foreclosure mediation, down payment assistance for qualified individuals and emergency housing needs, said Jennifer Eby, community development block grant administrator. Requests for emergency housing assistance increased about 15 percent from 2006 to 2007, Eby said.

“I know from talking with service providers the amount of clients coming to them is increasing rapidly,” she said. “It’s a basic shift in the economy. I think the issue is the downturn in the economy and increasing costs – everybody across the board is starting to feel it now … you have a lot of people having a hard time making ends meet and they have to go to these agencies for assistance.”

In the foreclosure mediation program, the full-time position and foreclosure workshops are courtesy of a $75,000 federal grant, part of $150 million in taxpayer funds earmarked to fight the foreclosure fallout, he said.

“It’s like the perfect storm. The credit crunch combined with the economy, lenders willing to make any kind of loan …” Anderson said. “I would almost say the borrower [pays the highest price, but] unfortunately what’s happening is the government has to step in and at end of day it comes back to the taxpayers.”

The Douglas County housing partnership foreclosure mediation workshops begin at 7 p.m., May 6 and May 20, at 9350 Heritage Hills Circle in Lone Tree. Workshops will take place the first and third Tuesday of each month. For more information call 303-784-7857

303-663-7162 | rmoore@ccnewspapers.com.

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