Foreclosures still well below record

Leading economic indicators

Foreclosures still well below record

Jane Albritton

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Business Report Correspondent
Foreclosures along the Northern Front Range are on the increase for the first time since 1988, with the numbers up in Larimer and Weld counties in Colorado and Laramie County in Wyoming. Deborah Morgan, Larimer County public trustee, said there were 952 foreclosures in 1988. By 1994, the number had dropped to 105, and 1995 saw only a 5 percent increase to 111. In 1996, however, the number jumped 36 percent to 151. Numbers are up again this year, although the count is not final.
The same pattern is occurring in Weld County. Donna Schmidt, deputy public trustee, has recorded 155 foreclosures so far in 1997. That is up from 114 for all of 1996.
"These foreclosures are mostly on private homes," Schmidt said. "It appears that businesses make up very little of this total, maybe 3 to 5 percent."
The pattern of increase also holds true in Wyoming˜s Laramie County. In 1987, there were 204 foreclosures, a number that had dropped to 39 by 1996. By late 1997, there were 37 foreclosures recorded, with more scheduled before the end of the year.
Although there is no dispute that in raw numbers foreclosures are trending upward, how to interpret that trend is another matter.
Miriam Masid, in the law firm of Wolfe and Masid, has been practicing in Fort Collins since 1984. With most of her practice in the real-estate area, she was keenly aware of the market in the late 1980s.
"Continental Airlines was in bankruptcy, interest rates were very high, and lenders were buying down loans to help buyers qualify. When the buydowns ran out, the homeowners couldn˜t keep up with the payments," she said.
So far, an increase in foreclosures has not become apparent in her own practice, in part because out-of-state lenders go to Denver for their representation. And in general, Masid sees no real cause for alarm.
"There was an artificial increase in the value of homes for two or three years," she said. "With interest rates low, there was a seller˜s market. With the recent increase in inventory, the balance has shifted in favor of buyers, and those people who bought at the top of the market may not be able to get out for what they paid."
Will Harper, a member of the board of directors for the Colorado Association of Realtors, agrees with Masid that the increase in foreclosures is worth watching, but as yet it is not a real trend and is no cause for alarm.
"Right now, HUD homes (foreclosed homes held by the U.S. Department of Housing and Urban Development) are virtually unknown," Harper said. "And these days I don˜t even check for homes with VA loans. But I can remember the days when we had 12 or 15 HUD homes available every two weeks in Fort Collins. Now there are barely that many in Denver."
When asked what is pushing up the numbers of foreclosures, bankers, attorneys and county officials tend to agree: consumer debt.
Bill Kurtz, manager of business banking and senior vice president of Norwest Bank, suggests that what we are seeing is a national trend appearing locally. Kurtz said the local process has run something like this: "With the escalation of real-estate prices, someone with a $100,000 home suddenly had property worth $175,000. That creates some real spending power. People took home-equity loans and consolidated their credit-card debt. The housing prices flattened out, leaving the owner with nothing to cover new credit-card debt."
When home owners run out of equity to borrow against and can no longer make their payments, then they either sell the house or face foreclosure. Kurtz points out that while it might be convenient to blame enthusiastic lenders who use adjustable rates to tempt buyers to purchase homes that they cannot really afford, adjustable rates have held steady and in some cases have adjusted down.
Harper points out that adjustable rates, while not a cause for concern right now, are a potential problem because so many people live month to month and have no reserves for emergencies."You take a two-wage family. Even a $100 increase in monthly payments can stretch family resources. And if one of the two loses a job, there is real cause for anxiety."