- RealtyTrac shows spike in Jefferson County foreclosures.
- 232% percent increase not a sign of another foreclosure crisis.
- Backlog of foreclosure processing by troubled law firms to blame.
Jefferson County experienced a 232 percent spike in foreclosure activity in February, according to a national report.
However, the increase is almost certainly due to a backlog caused by lawsuits filed by the Colorado Attorney Genera’s office against several large law firms, and not because of more people losing their homes. Among other things, several large firms that in recent years have been handling many foreclosures in the Denver area, have been charged with inflating charges. One law firm even closed in the wake of the charges.
“We do not know of any storm clouds on the horizon in Colorado, other than, call them technical problems, causing the backlog from the actions against the big foreclosure law firms,” said Daren Blomquist, vice president at RealtyTrac, which released the local and national report last week.
Across the U.S., foreclosure activity is at the lowest level since July 2006, according to RealtyTrac.
Colorado and the Denver area, however, have been experiencing foreclosure activity levels below pre-recession years for several years.
Denver was one of the first metro areas in the U.S. to be hammered by the foreclosure crisis. It also was one of the first to emerge.
Home prices now are at record prices and unemployment is low, which means fewer homes are being returned to lenders. Home affordability is now a much greater concern in the Denver area than foreclosures.
“Colorado is not only back to normal, it is below normal,” as far as foreclosure activity, Blomquist said.
“It’s getting to the point where we might start having the debate whether foreclosures are too low,” Blomquist said.
New loans, he said, have default rates far below historical averages because underwriting has become so strict.
“Foreclosures are now becoming so rare because people are being denied access to credit; we might have to start ourselves if we have gone too far,” Blomquist said.
He also cautioned that with the number of foreclosures dropping, there can be volatile swings in percentage swings.
For example, Broomfield showed a 200 percent increase in foreclosure activity in February from February 2014. However, Broomfield only had 12 homes in some stage of foreclosure last month.
The 339 foreclosures in Jefferson County accounted for about half of the foreclosures in the Denver area in February, according to RealyTrac.
“From talking to people on the ground, the main impact is from the actions that the attorney general took against those law firms,” Blomquist said.
Earlier, that pattern was found in several Denver-area counties:
County Foreclosure action per household year-over-year change in February Total foreclosure actions
Adams 1,048 -43.9% 156
Arapahoe 2,027 -70.7% 118
Boulder 6,721 -29.2% 19
Broomfield 1,934 200% 12
Denver 19,182 -89.0% 15
Douglas 5,414 -51.2% 20
Elbert 8,969 -75.0% 1
Jefferson 680 232.35% 339
Park 1,750 -70.4% 8
“It appears that Jefferson County is the last one suffering from the backlog,” Blomquist said.
RealtyTrac has introduced a 12-month moving average metric to its data base, which indicates the surge in foreclosures in Jefferson County in February is more of a blip than a trend.
In February, it showed that Jefferson County was averaging 116 foreclosure actions each month by the measure, which was 7 percent down from the 12-month moving average in February 2014.
“Despite the big jump in Jefferson County, I would say the trend is that foreclosures are dropping,” Blomquist said. Overall, in Colorado, one out of every 1,924 households were in some stage of foreclosure from the initial filing to a REO sale. That compared with one out of every 1,295 household nationwide.
In Colorado, foreclosure activity was down 10 percent, year-over-year in February, compared with 9.4 percent drop for the entire country.
“Given that August 2006 was the peak of the housing bubble, this eight-and-a-half year low in foreclosure activity is a significant milestone and a sign that nationwide foreclosure activity is on track to return to historic norms this year — and is possibly even headed below historic norms given the skinny-jeans-tight lending standards over the past five years,”Blomquist said about the overall foreclosure picture for the U.S.
“In markets where foreclosures were processed more efficiently we are seeing foreclosure numbers now below pre-crisis levels in some cases,” Blomquist continued.
“Conversely, the cleanup of deferred distress is continuing in markets where a logjam of in-limbo foreclosures is still lingering from the housing crisis — as evidenced by rebounding foreclosure activity in those markets,” he said.
Interested in buying a home in Jefferson County? Please visit COhomefinder.com.
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