Denver report shows foreclosure rates rising

Mortgages are falling into foreclosure in Denver faster than they have in the past, according to a report released Tuesday by the city's Office of Economic Development.

The age of loans going into foreclosure has dropped to 2.5 years in 2005 from 7.4 years in 1994, according to the report, which attempts to determine the underlying causes of the rise in residential foreclosures.

The foreclosure rate for Denver has risen to 5.9 percent in 2007 from 0.8 years in 2000, the OED found.

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OED examined the database of the Denver Public Trustee's Office of foreclosure filings from 2001 to 2007 and matched the information with Home Mortgage Disclosure Act data, which provides information on mortgages.

Copies of the report are available atwww.milehigh.com.

Findings of the OED research reveal:

• 6.6 percent of loans originated annually in Denver become delinquent and enter the foreclosure process within five years,
• Loans are defaulting and entering the foreclosure process much quicker than ever: 83 percent of recent filings were made up of loans originated in three years or less,
• 56.6 percent of foreclosure filings in 2006 and 2007 resulted in a homeowner losing their home through a public trustee sale. That amounts to about 2,686 homes in 2006 and 4,191 homes last year.
• northeast and southwest Denver have the highest rates of foreclosure.
• neighborhoods with higher foreclosure rates tend to have larger proportions of blacks and Hispanics than Denver as a whole.
• loans taken by blacks and American Indians are more likely to end up in foreclosure than loans taken by other racial groups.
• the increased foreclosure rate isn't because of the economy, but a proliferation of nontraditional loan products, especially involving high or subprime interest rates.

The report concludes with recommendations on how to fix the foreclosure problem. Among the suggestions: De-emphasize the view of homeownership as a risk-free investment.

"Late night infomercials and unscrupulous mortgage brokers have sold unsuspecting homebuyers to the idea that homeownership is a risk-free investment," the report noted. "And, with double-digit price appreciation in the late 1990s, and little or no upfront capital required to buy a home these days, people who would have ordinarily not bothered with homeownership are buying homes to cash in."

The report also recommends creating a citywide foreclosure taskforce to coordinate the efforts of all Denver agencies and departments, and creating a loan pool to help homeowners who may have defaulted on their mortgages because of a temporary setback such as illness or job loss.