Another Day Another Foreclosure
The Denver Post reported today that Colorado is leading the country in the ratio of foreclosures.
"One out of every 339 homes in the state was in some stage of foreclosure during March, according to RealtyTrac, an online provider of foreclosure listings."
If Colorado homeowners are at less risk for a 'negative equity' situation here, as we discussed yesterday, then what is going on here?
"We look at foreclosures as a lagging indicator. It usually says something else bad has happened," said Rick Sharga, a vice president at RealtyTrac in Irvine, Calif. Some of those bad things are evident in Colorado - large job losses, home construction that has outstripped demand and the heavy use of mortgages where payments move higher as interest rates rise.
Colorado suffered heavy job losses in 2002 and 2003, and although job growth has returned, many households still may be struggling to stay current. Home construction has outrun population growth in some counties, keeping a cap on price gains.
Borrowers here also lead the nation in their reliance on adjustable-rate and interest-only mortgages. Payments on those loans have risen as interest rates have ticked higher. "
As we've discussed before, many factors play into foreclosure scenarios. In my opinion, the biggest factor in the Colorado market is the use of these adjustable rate (ARM) loans - especially what we call 'sub-prime' ARM loans or loans with higher interest rates given to those with bumpy credit. The problem is that most sub-prime borrowers are never taught how to improve their credit situation while they are in their present loan - leading to another high-interest loan with an even higher payment. It is a never-ending cycle that puts borrowers at risk to default and lose their home.
"Foreclosures, like a funnel cloud, tend to create their own downward spiral once they get started, said Lori Strange, director of planning and resource development at the Adams County Housing Authority in Commerce City."
"Peter Cross, housing administrator with the Arapahoe County Housing Authority, points a finger at mortgage brokers, who are unlicensed in Colorado.
'People are not getting the best information and the best deal for their families,' he said.
Cross said he recently counseled a couple who refinanced out of a reasonable fixed-rate traditional mortgage and into a one-year adjustable rate mortgage that they couldn't keep up with."
Peter makes such a good point here. Since Colorado mortgage brokers are still unlicensed, it is so important to find a qualified, reputable loan professional to avoid being given bad advice that leads to financial disaster.
-Bill Burniece
The Denver Post reported today that Colorado is leading the country in the ratio of foreclosures.
"One out of every 339 homes in the state was in some stage of foreclosure during March, according to RealtyTrac, an online provider of foreclosure listings."
If Colorado homeowners are at less risk for a 'negative equity' situation here, as we discussed yesterday, then what is going on here?
"We look at foreclosures as a lagging indicator. It usually says something else bad has happened," said Rick Sharga, a vice president at RealtyTrac in Irvine, Calif. Some of those bad things are evident in Colorado - large job losses, home construction that has outstripped demand and the heavy use of mortgages where payments move higher as interest rates rise.
Colorado suffered heavy job losses in 2002 and 2003, and although job growth has returned, many households still may be struggling to stay current. Home construction has outrun population growth in some counties, keeping a cap on price gains.
Borrowers here also lead the nation in their reliance on adjustable-rate and interest-only mortgages. Payments on those loans have risen as interest rates have ticked higher. "
As we've discussed before, many factors play into foreclosure scenarios. In my opinion, the biggest factor in the Colorado market is the use of these adjustable rate (ARM) loans - especially what we call 'sub-prime' ARM loans or loans with higher interest rates given to those with bumpy credit. The problem is that most sub-prime borrowers are never taught how to improve their credit situation while they are in their present loan - leading to another high-interest loan with an even higher payment. It is a never-ending cycle that puts borrowers at risk to default and lose their home.
"Foreclosures, like a funnel cloud, tend to create their own downward spiral once they get started, said Lori Strange, director of planning and resource development at the Adams County Housing Authority in Commerce City."
"Peter Cross, housing administrator with the Arapahoe County Housing Authority, points a finger at mortgage brokers, who are unlicensed in Colorado.
'People are not getting the best information and the best deal for their families,' he said.
Cross said he recently counseled a couple who refinanced out of a reasonable fixed-rate traditional mortgage and into a one-year adjustable rate mortgage that they couldn't keep up with."
Peter makes such a good point here. Since Colorado mortgage brokers are still unlicensed, it is so important to find a qualified, reputable loan professional to avoid being given bad advice that leads to financial disaster.
-Bill Burniece
posted by Bill | 1:06 PM
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