Foreclosure surge coming?

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Do you think the worst is over, or if there is more foreclosure pain coming? Vote at the end of this blog.

Earlier today, the Colorado Division of Housing released a report published by InsideRealEstateNews that contains mostly good news regarding people in the state losing their homes in foreclosures. Foreclosure activity in November has hit a 20-month low, and it appears there have been enough months of drops in filings and sales to call it a trend.

But can it be sustained, or is this the eye of a foreclosure hurricane, which will buffet homeowners in Colorado in the coming months?“We realize some of the declines in the filings and sales is because of the advent of lenders reviewing foreclosure paperwork this fall, starting in October,” said Shannon Peer, director of housing counseling at the non-profit Brothers Redevelopment. Peer said talking with public trustees, it appears that foreclosures being reviewed “have not gone back into the system yet,” and likely will be re-filed in the coming months. A number of large lenders, such of Bank of America and others, halted processing foreclosures in light of attention on “robo-signing” of foreclosure documents that may not been properly reviewed. Indeed, Colorado Attorney General is joining with every other attorney general in the nation in investigating the foreclosure practices of banks.

Foreclosure hotline busy

Stephanie Riggi, who runs the Colorado Foreclosure Hotline (1-877-601-HOPE), said while there has been some seasonal declines in calls in December, there are still are a lot.

“We have right under 2,000 calls for this month, and in my expert opinion, that is a pretty high number,” Riggi said. “And a lot of these calls are pretty urgent. These people are in pretty desperate situation. I think when we are returning from the holiday break, we are going to be hammered by phone calls in January.”

Zachary Urban, director of housing counseling at the Adams County Housing Authority, said he believes there has been an “artificial depression” of foreclosure filings because of people entering temporary modifications under programs, such as HAMP, the Obama Administration’s Home Affordable Modification Program, or other lender programs. If they are not accepted into the permanent modification programs, “that could mean that filings will either remain steady or go up a little bit. There are a lot of unknowns and still some very real risks.”

Jobs are keys

Ryan McMaken, spokesman for the Colorado Division of Housing, agreed, although he said it is encouraging that foreclosure filings have been dropping off for more than a year. He noted there were “big bumps” in filings in 2008 and 2009, reflecting job losses. “Now that we are seeing some stability in the job market that appears to be changing,” McMaken said. “Surprisingly, home prices did not decline that much for single-family homes. And as our earlier report show, demand is strong for single-family home rentals. They are very tight. That bodes well for investors wanting to buy homes.” He also noted that the Mortgage Bankers Association is showing fewer 30-day, 60-day and 90-day delinquent mortgages in Colorado.

The big questions, McMaken said,  are: “How much inventory is out there right now that we don’t know about? Is there a lot not being processed out?”

Those are homes are sometimes described as the “shadow market” and could be the next foreclosure housing shoe to drop, some experts worry.

But even if the worst-case scenario of suddenly be swamped with thousands of new distressed homes on the market, McMaken said that the numbers of people losing their homes must drop dramatically before the state returns to a normal market, based on historical data.

“That could take years.”

Do you think the foreclosure crisis will worsen next year?

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Contact John Rebchook at JRCHOOK@gmail.com

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John Rebchook

John Rebchook has more than 30 years of experience in writing and communications. As the Real Estate Editor for the Rocky Mountain News, he wrote about residential and commercial real estate for 26 years. He has won numerous awards for business stories and columns that he wrote, both as an individual and part of teams. In addition to real estate, he also covered economic development, banking and financing, the airlines, and cable TV for the Rocky. In addition, he was one of the original freelance writers for GlobeSt.com, covering commercial real estate for the Internet publication.

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