Foreclosure crisis expected to worsen in Colorado

One in 25 Colorado homeowners is forecast to be in foreclosure in the next two years because of subprime loans made during 2005 and 2006, according to a study released Wednesday.

The study was done by The Pew Charitable Trusts, which painted a grim picture of a coming foreclosure crisis and detailed the ripple effects that are expected to wash through the economy.

If the Pew forecast holds true, the number of Colorado homes in foreclosure would dramatically increase. A report released this week by RealtyTrac Inc. said one of every 339 Colorado homes were in foreclosure during March.

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Pew predicts one in 33 homeowners in the United States is expected to be in foreclosure in 2008 and 2009, but the forecast is especially dire in Nevada (one out of 11) and Arizona (one of out 18). The Pew study, which recommends state legislatures take action to help consumers facing foreclosure, says nearly 2.3 million homeowners are likely to be in foreclosure across the country and another 40.6 million will feel the effects from reduced property values.

In Colorado:

• an estimated 32,040 homes were in foreclosure in December
• 49,923 homes will be foreclosed upon in 2008 and 2009 because of subprime loans made in 2005 and 2006
• 748,652 neighboring homes will be devalued because of those foreclosures
• the decrease in value and loss to the tax rolls could amount to $3.2 billion
• 22 percent of all loans made in 2005-2006 were subprime
• 51 percent of all homeowners are likely to feel the effects of foreclosures from subprime loans
• affected homeowners are forecast to lose $4,251, on average, from their property values

The report noted that Colorado already has in place foreclosure intervention regulations or laws and counseling efforts.

A separate report released last week showed the Colorado Foreclosure Hotline received 3,050 calls in March, continuing a steady increase in the number of calls its counselors have received since its inception in October 2007. Call center representatives received 1,553 calls from struggling homeowners in December; 1,997 in January; and 2,258 in February. During 2007, the hotline received an average of 75 calls per day, but now receives about 120 calls per day, officials said.

RealtyTrac reported Colorado's foreclosure rate dropped in March, although the state continued to post the fifth-highest rate in the nation. Colorado foreclosure activity declined 8 percent from February and fell 1 percent from March 2007. Foreclosure filings were reported on 6,180 Colorado properties in March, or one in every 339 total households.