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Latest Foreclosure Report Denver Market Update May 2021

Foreclosure starts remain unnaturally low. Unemployment stuck around 6%. Foreclosures delayed till 2022? What does this mean?

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A Comparison of Historical Rates of Foreclosure

Lets talk trends over the past 20 years before digging deeper into the past 12 months.

Since 2014 rates of foreclosure have been at their lowest levels for the last 20 years. In fact they are lower than pre-recession levels. 

I would expect this and here’s why. 

  1. Denver has experienced significant appreciation.
  2. Money is very cheap
  3. Banks are willing to refinance and restructure mortgages
  4. By doing a refi the payments are lowered and extended
  5. Easy access to refi’s mean the foreclosure process is avoided and rates are low

In the short term, this is great news for the homeowner. However there is cause for concern. AND HERE’S WHY…

We talked to Casey Reichter, Accountant, Financial Advisor, and Realtor about what she is seeing. She stated, “Did the household make changes to their financial situation or just refi and call it good? To prevent foreclosure in the future they need to change how they handle money. If they continue spending as they were and not saving there is a good chance they will get behind on their mortgage again. Once this happens they will be looking for ways to prevent another foreclosure.”

Click here to see a short clip from Casey Reichter. She is very smart and practical.

Let's Discuss More Recent Foreclosure Rates

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Using the same data we can see an obvious dip in 2020. AND this dip has continued into 2021. However, if we now look at unemployment rates the numbers don’t add up. WHY?

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Normally when unemployment rates increase so too does the number of foreclosures. BUT as we saw foreclosures are down. 

I think we can agree that the foreclosure rate dropped because of local, state, and Federal Government stepping in to stop foreclosures. This government action was due to the Global Pandemic. 

However, what will the impact be on housing once the moratorium is lifted?

  • Will there be a flood of foreclosures?
  • Will the flood cause Denver house prices to fall?
  • What will happen to the housing market nationally?

Colorado Unemployment rates since January 2020

Unemployment was as high as the great recession. Does this mean house prices will fall like that period too?

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Unemployment rates spiked in April 2020 and remained higher than normal for the rest of 2020. Unemployment rates do remain high and are higher than all periods over the last 20 years except during the great recession. 

Now we know that, normally, when unemployment rates are up so are foreclosure. 

So will house prices in Denver drop dramatically?

KEY POINTS AND DIFFERENCES BETWEEN NOW AND THE GREAT RECESSION

  • Rates spiked in April 2020 dropped back to 6.4% quickly.
  • During the great recession, unemployment was above 7% for several years.

The longer the unemployment rate stays high the more foreclosures we will see. During the great recession, the market was inundated with foreclosures. Denver house prices were very low. It was not uncommon to buy a 3 bedroom ranch for $50,000 or less. The same ranch will sell for $400,000 in 2021.

What will happen to foreclosure numbers after the recent spike?

We are experiencing a higher rate of unemployment currently at around 6.4%. We also witnessed a rate in excess of 10% (12.2% at its height last year). The result should be more foreclosures. Instead, foreclosure rates are at extremely low rates.

WHy?

The government, local, state and federal have influenced the number of foreclosures that have been processed. This is great news for those facing foreclosure. 

 

So what will the impact be on the Denver housing Market in the coming months and years. 

Foreclosures Will Not Impact Denver in the Short Term.

With the foreclosure moratorium still in place, the potential for foreclosures hitting the market and causing prices to drop is basically zero. But is there an end in sight?

Maybe, maybe not. 

In a recent proposal, the Consumer Financial Protection Bureau (CFPB) wants to extend the ban on foreclosures until 2022.

The proposal includes:

  • Time for borrowers to explore: prohibits lenders of loans back by the federal government (most of them) from starting proceedings until after December 31st, 2021. 
  • Options for Lenders: Allows lenders to offer a streamlined process for borrowers to modify their loans if it is the result of financial hardship caused by COVID-19.

What if you have a loan that is not backed by Fannie or Freddie?

The CFPB issued a statement to private lenders: “Our first priority is ensuring struggling families get the assistance they need. Servicers who put struggling families first have nothing to fear from our oversight, but we will hold accountable those who cause harm to homeowners and families,” says CFPB acting director Dave Uejio.

Strong words. While I personally believe we should try and help people in financial difficulty is David overstepping with this statement? Is the CFPB threatening to review private banks more closely if they do what is in their legal right? 

Interesting times indeed.

We have reached out to several banks in Colorado that provide private loans and mortgages to understand their stance. 

Banks we reached out to and are waiting for responses.

  • First Bank
  • Alpine Bank
  • Bank of Colorado
  • Central Rockies Mortgage Corporation
  • Mega Star Financial Corporation

 

What are your thoughts on the current foreclosure situation?

Would love to hear what you are thinking, seeing in your town, city, or state.

Leave a comment below. Maybe you want to add content with a quick video call? We would love all insight regardless of who you are.

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