Colorado Shows First Signs of a Downward Trend

According to the RealtyTrac U.S. Foreclosure Market Report for August, the nation's foreclosure activity rose almost 12% from July and 27% from August 2007.

One in every 416 U.S. households received a foreclosure filing during the month. With one in every 452 households receiving a foreclosure filing in August, Colorado's foreclosure rate was slightly below the national average but continued to rank among the 10 highest state foreclosure rates. Colorado foreclosure activity in August was down nearly 14% from July and nearly 30% from August 2007.

"Colorado was on the front edge of the national surge in foreclosure activity that we've seen over the past two years, and it also appears to be one of the first states to show a consistent downward trend in foreclosure activity," said Rick Sharga, senior vice president at RealtyTrac, an online marketplace for foreclosure properties. "Our numbers show a peak in Colorado foreclosure activity in January with a fairly steady downward trend since then - some of which could be attributable to an extension of the state's foreclosure process."

Mr. Sharga was a featured speaker during the recent Colorado Association of Mortgage Brokers Convention & Expo at the Marriott Denver Tech Center. His educational breakout session titled "Foreclosures in Colorado" focused on the past, present and future of the foreclosure phenomenon that has a stranglehold on the national economy. He discussed recent federal legislation and the impact such actions are likely have on foreclosure activity in the foreseeable future.

"The nation's economy is dependent on the real estate market to bottom out and turn the corner before any true healing from the mortgage crisis can begin in earnest," said Mr. Sharga. "The federal government is attempting to legislate the economy back to health. However, with the labor market continuing to shed jobs, more citizens filing for bankruptcy protection, and the foreclosure floodgates wide open, legislation alone is not enough. Investors and ordinary citizens need to feel confident of their own financial stability. Until that confidence returns to the marketplace, foreclosures will continue to delay any real economic recovery."

The RealtyTrac report shows foreclosure filings, including default notices, auction sale notices and bank repossessions, were reported on 303,879 U.S. properties during August.

"In August, the total number of U.S. properties that received foreclosure filings as well as the national foreclosure rate were both the highest we've seen in any month since we began issuing our report in January 2005. However, the annual increase of 27% was actually substantially lower than in previous months this year, when it was hovering around 50 to 65%," said James J. Saccacio, chief executive officer of RealtyTrac. "The lower annual percentage increase this month is due to a big spike in activity last August - particularly in default activity. Over the past few months we've seen annual increases in default activity and auction activity moderating, and that trend continued in August, with default activity up just 10% from a year ago and auction activity up 7% from a year ago."

Mr. Saccacio said the increases in default and auction activity could be slowing down partly as the result of new legislation passed in several states that is designed to give homeowners in distress more time before foreclosure proceedings are initiated.

In addition, some lenders are adopting loan servicing guidelines that encourage more pro-active approaches to helping homeowners avoid foreclosure. "The question now is whether these measures will actually reduce foreclosures or simply cause a temporary lull in foreclosure activity," he said.

With one in every 91 households receiving a foreclosure filing in August, Nevada continued to document the nation's highest state foreclosure rate for the 20th consecutive month. Foreclosure filings were reported on 11,706 Nevada properties, a 16% increase from July and an 89% increase from August 2007.

Arizona registered the third highest state foreclosure rate, with one in every 182 households receiving a foreclosure filing during August.

According to the Mortgage Bankers Association's national delinquency survey, at the end of the second quarter of 2008, national foreclosure numbers continue to be driven by the hardest-hit states continuing to get much worse.

"The increases in foreclosures in California and Florida overwhelmed improvements in states like Texas," said Jay Brinkmann, MBA's chief economist and senior vice president for research and economics. "For the quarter, a majority of the states saw relatively little change one way or the other. California and Florida alone accounted for 39% of all of the foreclosures started in the country during the second quarter and 73% of the increase in foreclosures between the first and second quarters." Only eight states had rates of foreclosure starts that were above the national average: Nevada, Florida, California, Arizona, Michigan, Rhode Island, Indiana and Ohio. The remaining 42 states plus the District of Columbia were below the national average.

"Perhaps the question most asked these days is whether we are close to a bottom, in other words, when will delinquency and foreclosure rates begin to head down?" said Mr. Brinkmann. "The simple answer is that the idea of a national bottom is somewhat meaningless. Real estate markets are local and some markets are already improving. For example, even Michigan, one of the worst hit markets in the country, has now gone three quarters with little to no increase in its rate of foreclosures. Likewise, Massachusetts showed a very large drop in foreclosure starts, perhaps signaling a bottom. Because of the sheer size of California and Florida, an improvement in the national numbers, whether delinquencies, home prices or any other measure, is unlikely until we see some turnaround in those two states."

For the second quarter of 2008, Colorado public trustees reported 10,875 foreclosure filings, according to the most recent report from the Colorado Division of Housing. There were 11,630 filings during the first quarter of 2008, and 10,017 filings during the second quarter of 2007. There were 39,915 foreclosure filings during the full year of 2007. Total filings dropped 6% from the first quarter to the second quarter of this year. Compared to the second quarter of 2007, the second quarter of 2008 had 9% more foreclosure filings. For the first 6 months of 2008, Colorado has experienced 16% more foreclosure filings than the same period last year. The division said Colorado public trustees reported 3895 foreclosure sales, a 38% decrease from the second quarter of 2007. Foreclosure sales decreased 34% from the first quarter to the second quarter of 2008. Due to the change in the foreclosure process, foreclosure sales of new foreclosures filed during 2008 were not permitted during March and April. It lead to an artificially muted number of foreclosure sales during 2Q qarter including April.

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