Foreclosures soar
Home defaults hit highest level since oil bust days of'88
By John Rebchook, Rocky Mountain News
December 21, 2004
More than 11,000 real estate foreclosures have been filed in the seven-county Denver area through November, about 18 percent more than in all of last year.
And public trustees are estimating that 2004 will end with about 12,290 foreclosures, making it the second-worst year on record.
Only 1988, when there were 17,122 foreclosures, topped this year. Last year, 9,431 foreclosures were filed, which had been the second-worst year.
And there's no sign of a slowdown, even as the economy picks up steam.
"They just keep coming in droves," said Bonny Kovtynovich, deputy public trustee in Adams County.
Mary Wenke, public trustee for Arapahoe County, is seeing the same trend.
"They just keep escalating," she said. "We opened 40 (foreclosures) in one day. They never seem to be leveling off for any period of time. We could probably easily go over 3,200 this year (in Arapahoe County), maybe 3,300."
Economist Tucker Hart Adams said she's not surprised that foreclosures have risen so much. She expects even more foreclosures next year, although the rate of increase may slow.
"It certainly is a matter of concern," Adams said. "I think the worst is not over, because they are a lagging indicator. Colorado and the Denver area have been through a pretty rough patch since 2000, and we're just barely starting to claw our way out in terms of job gains. If you do not have a job, it's pretty hard to make a payment on your house."
Adams said that she thinks that lenders have made it too easy to buy a home and then borrow on it, which is contributing to rising foreclosures.
"People who could never qualify to buy a home before are now moving from apartments," she said. "Rising homeownership rates, now approaching 70 percent, is good news and bad news. It's good for most people, but not if you live in your home for only a year or 18 months before losing it in a foreclosure."
Peter Lansing, president of Universal Lending, one of the largest locally based mortgage bankers in the metro area, said both lenders and consumers are to blame for the increase in foreclosures.
"I believe my industry has some responsibility," he said, noting that almost every day many people receive unsolicited mail telling them they are pre-approved for loans.
"But I also think there is blame from the consumer who asks us for the credit and is using his house like an ATM machine," Lansing said. "Some of that is OK, but some people take it too far."
Also, if overall home values rise by less than 4 percent this year, there will be parts of the metro area where homes are showing no appreciation or are even losing value, he said. That makes it almost impossible to sell homes in those areas if the owner gets divorced, loses a job or becomes too sick to work, he said.
However, the market is not as dire as it was in 1988, when Lansing was chairman of a long-disbanded foreclosure task force.
"I don't see it as an epidemic like we did in the late '80s when the oil industry was leaving Colorado," Lansing said.
If the projections are correct, slightly more than 1 percent of the homes in the metro area will end up in foreclosure this year, compared with an estimated 2.3 percent of the total homes on the market in 1988.
And the rate of foreclosures has slowed dramatically from the beginning of the year, when foreclosure activity was up 67 percent from the first quarter in 2003.
Lansing noted that home sales are still high, and a record $13.6 billion in previously owned homes already have sold.
"It's not the out-of-control snowball rolling down the hill. We're not seeing the crisis we saw in the late 1ate 1980s," he said.
However, he said that also means people aren't seeing the home buys available in the late 1980s, when lenders and the U.S. Department of Housing and Urban Development were offering huge discounts on homes in order to unload them. At one point, HUD was the largest landlord in the Denver area, and in some cases would pay people to take houses off its hands.
And the reason money is so readily available for home loans is because many parts of the country are seeing huge housing appreciation and foreclosures are low. On a national basis, Wall Street packages 100 percent first and second mortgages and sells them as bonds, because the overall risk of default is relatively low, he said.
"If your home is going up 9 percent or in some places 18 percent a year, you will be able to liquidate your home if you lose your job and need to sell it," he said.
Home defaults hit highest level since oil bust days of'88
By John Rebchook, Rocky Mountain News
December 21, 2004
More than 11,000 real estate foreclosures have been filed in the seven-county Denver area through November, about 18 percent more than in all of last year.
And public trustees are estimating that 2004 will end with about 12,290 foreclosures, making it the second-worst year on record.
Only 1988, when there were 17,122 foreclosures, topped this year. Last year, 9,431 foreclosures were filed, which had been the second-worst year.
And there's no sign of a slowdown, even as the economy picks up steam.
"They just keep coming in droves," said Bonny Kovtynovich, deputy public trustee in Adams County.
Mary Wenke, public trustee for Arapahoe County, is seeing the same trend.
"They just keep escalating," she said. "We opened 40 (foreclosures) in one day. They never seem to be leveling off for any period of time. We could probably easily go over 3,200 this year (in Arapahoe County), maybe 3,300."
Economist Tucker Hart Adams said she's not surprised that foreclosures have risen so much. She expects even more foreclosures next year, although the rate of increase may slow.
"It certainly is a matter of concern," Adams said. "I think the worst is not over, because they are a lagging indicator. Colorado and the Denver area have been through a pretty rough patch since 2000, and we're just barely starting to claw our way out in terms of job gains. If you do not have a job, it's pretty hard to make a payment on your house."
Adams said that she thinks that lenders have made it too easy to buy a home and then borrow on it, which is contributing to rising foreclosures.
"People who could never qualify to buy a home before are now moving from apartments," she said. "Rising homeownership rates, now approaching 70 percent, is good news and bad news. It's good for most people, but not if you live in your home for only a year or 18 months before losing it in a foreclosure."
Peter Lansing, president of Universal Lending, one of the largest locally based mortgage bankers in the metro area, said both lenders and consumers are to blame for the increase in foreclosures.
"I believe my industry has some responsibility," he said, noting that almost every day many people receive unsolicited mail telling them they are pre-approved for loans.
"But I also think there is blame from the consumer who asks us for the credit and is using his house like an ATM machine," Lansing said. "Some of that is OK, but some people take it too far."
Also, if overall home values rise by less than 4 percent this year, there will be parts of the metro area where homes are showing no appreciation or are even losing value, he said. That makes it almost impossible to sell homes in those areas if the owner gets divorced, loses a job or becomes too sick to work, he said.
However, the market is not as dire as it was in 1988, when Lansing was chairman of a long-disbanded foreclosure task force.
"I don't see it as an epidemic like we did in the late '80s when the oil industry was leaving Colorado," Lansing said.
If the projections are correct, slightly more than 1 percent of the homes in the metro area will end up in foreclosure this year, compared with an estimated 2.3 percent of the total homes on the market in 1988.
And the rate of foreclosures has slowed dramatically from the beginning of the year, when foreclosure activity was up 67 percent from the first quarter in 2003.
Lansing noted that home sales are still high, and a record $13.6 billion in previously owned homes already have sold.
"It's not the out-of-control snowball rolling down the hill. We're not seeing the crisis we saw in the late 1ate 1980s," he said.
However, he said that also means people aren't seeing the home buys available in the late 1980s, when lenders and the U.S. Department of Housing and Urban Development were offering huge discounts on homes in order to unload them. At one point, HUD was the largest landlord in the Denver area, and in some cases would pay people to take houses off its hands.
And the reason money is so readily available for home loans is because many parts of the country are seeing huge housing appreciation and foreclosures are low. On a national basis, Wall Street packages 100 percent first and second mortgages and sells them as bonds, because the overall risk of default is relatively low, he said.
"If your home is going up 9 percent or in some places 18 percent a year, you will be able to liquidate your home if you lose your job and need to sell it," he said.