Colorado Home Foreclosure dream.
Colorado Home Foreclosure dream.?
Margie Ibarra worried about paying $160,500 for half a duplex. She knew
she was buying it with no money down and a pair of home loans, one
carrying a double-digit interest rate.
But she dreamed of spending her life on a peaceful street at the edge
of Brighton - and of owning 710 Mockingbird Lane free and clear when
she retired.
Instead, two years after she moved in, she lost the first home she ever
bought to a foreclosure.
"I took the keys with me. I made sure the door was locked and the
windows were shut. I cried when I was leaving. I loved my little
townhouse," she said.
These are troubled times on Mockingbird Lane.
In a two-block loop of Mockingbird Lane and Mockingbird Street - a
neighborhood built just seven years ago - there have been 23
foreclosures among 94 homes in five years. That's nearly one of every
four front doors. One home has been foreclosed three times, two others
twice.
The house-building boom and loose lending practices that ended
disastrously for so many people here mirror a pattern stretching across
Adams County, which has the worst foreclosure rate in a state with the
worst foreclosure rate in the nation.
In April, Colorado had one of every 494 households in some stage of
foreclosure, according to RealtyTrac. That's the highest rate in the
nation, where the average was one of every 1,268 households.
The last big foreclosure spike in Colorado came during economic crises:
the 1980s oil bust and savings- and-loan collapse.
The problem now, experts say, is that too many working-class families
take on crippling debt loads to seize their piece of the American
dream. They overpay for starter homes. They take on extreme mortgage
rates to avoid making a down payment with money they don't have.
"If you have a job and breath in your body, a builder will put you into
a new home," said Jan Buckner, who invests in foreclosure properties in
Colorado.
They wind up in a trap from which there is only one escape: losing
their home.
The mortgage trap
Mockingbird Lane curls beside a floodplain on the eastern bank of the
South Platte River, land Brighton initially zoned for manufactured
housing. Then a national builder, KB Home, showed up with a grander
vision in the late 1990s: a community of 556 affordable homes along
streets named for songbirds and waterfowl.
On Mockingbird Lane, many who moved into homes designed for first-time
buyers put little or no money down. KB offered easy financing. So did
other lenders.
Some homeowners refinanced quickly. Many accepted adjustable-rate loans
that could run as high as 16 percent when conventional 30-year
mortgages were below 6 percent.
It is common practice for lenders who originate a mortgage to resell it
to other investors. In almost every case, the lenders who foreclosed on
the Brighton homes did not originate the mortgage.
Colorado homebuyers have flocked to high-risk loans, which could
trigger more foreclosures if interest rates rise. Last year, Colorado
had the highest dependence on interest-only and adjustable-rate
mortgages of any state. The higher-risk loans accounted for 43.6
percent of all mortgages, compared with 26.7 percent nationally,
according to LoanPerformance, a California firm that tracks mortgage
risk.
Jim Spray, a Colorado mortgage broker who battled predatory lending
practices, and his wife, Linda, a Realtor, reviewed foreclosures on
Mockingbird Lane and Street at the request of The Denver Post.
They say they saw minimal down payments, and also refinancing loans,
that left homeowners owing more than their homes were worth.
At foreclosure, some buyers owed $20,000 to $30,000 more than their
original purchase price. "That's a killer," Linda Spray said.
Gov. Bill Owens this month signed a law that will require mortgage
brokers to submit to criminal background checks, post a $25,000 surety
bond and register with the state as of Jan. 1. Previously, Colorado was
one of only two states - Alaska being the other - that did not regulate
mortgage brokers.
Jim Spray hopes the new law will help.
But he worries what will happen when existing loans, especially "these
80-20s with no money down," kick into their adjustable- rate phases.
"We could well see another spike in foreclosures," he said. "It's
nowhere near over."
A tragedy in every file
Margie Ibarra was an unmarried hospital worker in her 40s when she
found her dream home on Mockingbird Lane.
Conventional-mortgage providers once demanded a 20 percent down payment
or mortgage insurance to protect the loan in case of default. Those
days are long gone.
Ibarra was among those who started out with a newer, and riskier, 80-20
loan. First Franklin Financial Corp. provided her a first mortgage
covering 80 percent of the purchase. Another lender supplied the
remaining 20 percent in a second mortgage.
That enabled her to buy a $160,500 house without a down payment in
2002.
Her first mortgage started at 6.5 percent interest but could climb to
12.5 percent. Her second mortgage, on the 20 percent balance, came in
at 12.75 percent.
Her payments started at $1,148 a month: $811 on the first mortgage and
$337 on the second.
"The foreclosure was due to my financing," she said. "I would have
rather had the mortgage company be honest and say, 'No, this is too
steep.' Why couldn't they have made me make just one payment at a fixed
rate? They make it sound so good."
First Franklin declined to comment.
"I kept trying to refinance. They would tell me you have to wait, due
to the fact that all of the properties in the area had gone down in
value," she said.
A car accident finally sank her hopes. She needed surgery. She borrowed
more money to buy a replacement vehicle.
After that, "I couldn't catch up," she said. Her home was foreclosed in
2004, less than two years after she bought it. She filed for bankruptcy
protection and let it go.
Ibarra has a steady job in patient financial services at Platte Valley
Medical Center. She pays her sister $450 a month in rent and is trying
to repair her shattered credit. But her dream of retiring in her own
home has died.
She said she drove through her old neighborhood the other day, passing
the home she loved. It sold for $131,000, nearly $30,000 less than she
paid for it.
Around the neighborhood, "so many houses are for sale," she said.
She knows she will not return.
"I am already 50," she said. "I will never own a house."
Throughout Adams County, foreclosures have clustered at the low end of
the market, where young couples, working-class wage-earners and people
with shaky credit hunt for homes of their own.
In six years, lenders have foreclosed on 59 homes at Welby Hill, a
condominium complex near Thornton, and 50 homes at View Point
Condominiums in Thornton. On Mockingbird Lane and nearby streets where
foreclosures are rampant, the homes are duplexes.
Since 1995, Adams County foreclosures have grown nearly eightfold,
reaching a record 3,281 last year. This year the county is on pace to
exceed 4,000.
Every one lands on the desk of Jeannie Reeser, the Adams County public
trustee, who spends her days signing foreclosure papers.
"I want to be No. 1 in something different," she said. "There's a
tragedy in every one of these files. I've had grown men cry on my
shoulders, and there's nothing I can do."
Creative financing
When a home is foreclosed, details of the loans become public records.
On Mockingbird Lane and Mockingbird Street, records of 23 foreclosures
- all of which were half a duplex - around a two- block loop show
Ibarra's financing terms were not so unusual.
A majority of the home loans came within $3,000 of the purchase price.
Some buyers borrowed the entire amount or all but a few hundred
dollars. Half the foreclosed loans had adjustable mortgage rates, and
some could raise payments within six months or a year after the
purchase.
Refinancing left other homeowners with no equity. At the time of
foreclosure, six owed more in principal alone than they originally paid
for the home. For homeowners in financial trouble, the increasing
supply of new homes makes it hard to get out.
The fatal event varies from home to home.
"I ended up getting a divorce, and I couldn't afford my house anymore,"
said Danielle Williams, who had two boys, a girl and no income after
her husband moved out. She lost her home at 785 Mockingbird St. one
year after they bought it.
Marilyn Sisti, the first of two homeowners foreclosed at 727
Mockingbird St., said she had a high-interest mortgage loan and lost
her job. Her variable interest rate started at 10.4 percent and could
have surpassed 16 percent.
Ernesto Rodriguez, who lost the house at 722 Mockingbird Lane, said he
simply couldn't keep up with $1,400-a-month payments. He realized, too
late, what a high price he paid: $161,900 for a house auctioned at
$130,000 and later sold for $145,000.
Gayle Langan remembers how pretty the neighborhood looked when it was
new.
A freshly planted park with a playground, picnic tables and basketball
hoops bordered the backyards on Mockingbird Lane. Next to the park,
sand and gravel excavators were scooping out a future lake for the
homeowners.
KB Home representatives talked of a fishing lake "and a little swim
beach," Langan recalled. They promised to fix any problems she found.
They made borrowing easy. The builder had its own mortgage branch.
"So you don't even have to find a lender," she said they told her.
"We'll take care of that."
She bought half a duplex in 2000 for $136,000. She said she put $6,000
down for the home, at 801 Mockingbird St., and borrowed the rest from
KB Home's mortgage arm, which later sold the loan.
>From the day she moved in, she said, her brand-new home had problems.
Windows leaked. A drain spout laid a sheet of ice on her sidewalk. In
her bedroom, she could hear the couple on the other side using ...