Mortgage foreclosures increase 33 percent in county

By Steven Olson
Correspondent

Help for mortgage troubles

The ugly truth about foreclosures in Larimer County is out--a 33 percent increase from 2005 to 2006.

Peggy Bauer of the Larimer County Public Trustee's Office said the figure for 2006 is 1,253 foreclosures compared with 939 in 2005. By late January, the office had tallied 81 for the new year, with an average of eight new filings a day, Bauer said.

Sara Allen, executive director of Consumer Credit Counseling in Fort Collins, is unsure as to why, between April and November 2006, Colorado led the country in the number of home foreclosures until it was displaced in December by Nevada. Most of those foreclosures are in a swath running through Adams, Boulder, Larimer and Weld counties.

Why Colorado? Why not some other state, like Missouri?

"I don't know," said Allen. "I think it just may be coincidence."

She adds that the numbers may be skewed by the way Colorado tabulates them. A lot of states tot up foreclosures at the end of the process; Colorado does not, Allen said. "Colorado counts them at the beginning when they're filed," she explained.

Another possibility is while Colorado does not lead the nation in having the most expensive real estate, it's up there. "It can be a little pricey to get your foot in the door," she said.

But the very first culprit Allen mentions is unscrupulous lending practices --some that were almost guaranteed to get people into trouble if the interest rates changed or their houses declined in value. Colorado was in the top five states in the country in adjustable rate mortgages, she noted.

Adjustable rate mortgages are not illegal or even unscrupulous; a lot of the time someone getting one can qualify for a house or even get more house than with the plain-vanilla, 30-year fixed mortgage. However, the mortgage payment is not static. It cannot be counted as a certain dollar amount every month. It can fluctuate based on the prime interest rate.

Also, there was a lot of what can euphemistically be called "creative financing" flying around Colorado in the past few years.

John Green, a regional economist who lives in Fort Collins, said the biggest culprit in the foreclosure boom is the no-money-down mortgage. "Without a doubt," Green said promptly. "To put money down, you have to have money. This is like going to Central City with a couple of bucks and playing roulette and thinking you're going to be rich."

Green said he couldn't even pin down a price range of houses for people in foreclosure. "I can't say it's people in $200,000 houses or $600,000 houses," he said. "It seems to be pretty much across the board."

Green said the foreclosure problem is a combination of unscrupulous lenders and gullible borrowers. "We had a very large number of mortgage companies out there sucking people in," Green mused. "I wonder how many of them have gone bankrupt."

"We have had clients whose homes have depreciated before," said Allen. "What they could do was sell the house, walk away and start over with a little bit of money."

What's different now is that some people have gotten in so deep that even if they sell their homes, they are still in the hole. "Selling their homes does not seem like a very good solution," she said.

"You've got a recipe for foreclosure," Green said. "For a lot of people, their answer is to let the bank eat it. So they walk away from their homes."

The good news, if there is any on this particular subject, is that Green thinks 2007 is going to be much better on the foreclosure front. "I think this is the worst of it," he said. "It's been about a year [since most of the unscrupulous lending practices], and it takes about a year for you to get into trouble."

House District 52 Rep. John Kefalas of Fort Collins said a bill that went into effect Jan. 1 creates a registry on which mortgage brokers are required to register before doing business in Colorado. "It's only 18 days old," Kefalas said in mid-January, "but it's already prevented 10 people from registering."

Kefalas also said the Colorado Division of Housing has a toll-free number, 1-877-601-4673, which people can call for information and advice about avoiding foreclosure and what they can do when they are in foreclosure.