Foreclosure filings drop 16% in second quarter

There were 10,233 new foreclosure filings in Colorado during the second quarter, a 15.7 percent drop from the second quarter of 2009, when there were 12,135, filings shows a state report released today. Second quarter filings were also down 8.1 percent from 2010’s first-quarter total of 11,136, according to the report released by the Colorado Department of Local Affairs’ Division of Housing,.

Foreclosure filings fell for the third quarter in a row with foreclosure filings now down 18 percent from the recent peak in filings activity experienced during the third quarter of 2009 when total filings hit 12,468. Denver County led the state, showing more than a 30 percent decline in foreclosure filings from the first quarter of 2009.

Foreclosures down, despite rising unemployment

“With foreclosure filings at their lowest point in five quarters, we think this constitutes a future downward trend” said Pat Coyle, director of the Division of Housing. “It’s becoming increasingly clear that in Colorado at least, new foreclosure filings are inching down in spite of a steady unemployment rate.”

Foreclosure sales soar

During the first half of 2010, foreclosure filings fell 5.6 percent as compared to the first half of 2009. However, foreclosure sales at auction rose 34.4 percent during the same period. Foreclosure sales at auction, the event that completes the foreclosure process, increased 17.7 percent from the second quarter of 2009 to the same period this year, rising from 4,999 to 5,885. However, foreclosure sales fell 12 percent from the first quarter’s total of 6,686 to the second quarter of this year.

Although year-over-year comparisons show marked increases in foreclosure sales totals from 2009 to 2010, foreclosure sales totals for 2010 remain in line with totals experienced during most quarters since 2006. Foreclosure sales during the first half of 2009 had been significantly affected by moratoria put on the processing of foreclosures by several major investors and servicers of mortgages. These moratoria drove foreclosure sales numbers to unusually low totals while quarterly totals in 2010 returned to more typical levels.

Foreclosure hotline keeping lid on sales

“Five thousand to 6,000 foreclosure sales each quarter has been the norm since 2006, but what’s notable is that in spite of the job losses in 2008 and 2009, the foreclosure sales numbers haven’t moved above those levels.” Coyle said. “This is where we’ve really seen the impact of the Foreclosure Hotline and the housing counseling agencies in Colorado. They’ve really helped put a limit on how many homes end up on the auction block.”

Ryan McMaken, spokesman for the Colorado Division of Housing, said that the long-anticipated spike in foreclosure filings due to people losing their jobs, and not because they had bad mortgages, never materialized.

“We’ve all been waiting for that other shoe to drop and it hasn’t,” McMaken said. “Way back in 2007, when we had all of these foreclosures and unemployment was not even high, we wondered what was going to happen when the economy turned south.”

McMaken agreed with Coyle that much of the credit goes to Colorado Foreclosure Hotline, 1-877-601-HOPE. The hotline was created in October 2006, when a lot of states didn’t yet even realize there was a foreclosure time-bomb hidden in east credit and lax underwriting standards. The hotline acted as “preventive medicine,” McMaken said, that kept the number of foreclosures from spreading like an out-of-control virus.

Call hotline earlier

Still, experts are concerned that homeowners are not calling the hotline, which will provide free advice and guidance from HUD counselors early enough.

Stephanie Riggi, who manages the hotline, said some people are calling after they already are four months behind in their mortgage payments. Often, they have been working with their lenders, possibly to qualify for a government program to reduce their interest rates, which is “well and good,” Riggi said. But if they called the hotline earlier, they could have reviewed all of their options earlier, and might save them some frustration and disappointment later.

“Calls are still coming in,” Riggi said. “Our numbers are not going down. I think the important thing is to get the message out to call earlier. A lot of situations could be avoided, or they would have more options for work-outs, if they get together with a counselor early and review all of their options.”

Foreclosure woes not going away until 2012

Peer said that despite the positive statistics, it is too early to declare victory in the war against foreclosures in Colorado.

“We are seeing this downward trend,” Peer said. “But despite the 16 percent decrease in filings, it’s very likely we won’t be out of this until 2012. This is a premiere time to discuss education and what we have learned from this crisis. For example, we want to be increasingly promoting homeownership education. We want to be proactive, instead of reactive.”

All Front Range counties reported year-over-year drops in foreclosure filings. Comparing the second quarter of 2009 to the same period this year, foreclosure filings in Denver County fell 30.4 percent, while filings fell 26.1 percent in Adams County and 23.4 percent in Weld County. Filings fell by 20 percent and 12.8 percent in Pueblo County and El Paso County, respectively.

Filings rise outside of Denver

The counties that did report increases in foreclosure filings were all found outside the metro Denver area and Colorado’s Front Range. Foreclosure filings in Mesa County increased 40.2 percent from the second quarter of last year to the same period this year. In Delta County, Montezuma County and Summit County, for example, foreclosure filings increased 46.3 percent, 12.5 percent and 23.4 percent, respectively.

Foreclosure sales are opened foreclosures that have proceeded through the full foreclosure process to final sale at public auction. Filings denote the beginning of the foreclosure process, and once a foreclosure is filed, the borrower has approximately four months to work with the lender to avoid a completed foreclosure. It is during this period that borrowers work with lenders and housing counselors to work out loan modifications, short sales, or other ways of withdrawing the foreclosure.

by John Rebchook for 8z Real Estate