A Jan. 12 story in The Durango Herald reported that foreclosures in La Plata County have significantly decreased in 2013, with only 73 foreclosure sales. There are several reasons for this. The obvious factor is the economy has improved, resulting in employment opportunities and the rebound of the housing market. Some homeowners, who were previously underwater, are now able to sell and avoid foreclosure when they have a loss of income. La Plata County residents should consider themselves lucky in this regard, as surrounding communities are still struggling.
Another factor, which is not as well known, is homeowners with a hardship are actively pursuing mortgage modifications with their lender. Common hardships include job loss (32 percent) and a health crisis (25 percent). Other common causes are divorce or death of a spouse.
The federal government created mortgage-modification programs in 2009 by passing the Financial Stability Act, which included the Making Home Affordable program. However, everyone agrees these programs were initially ineffective at best, and they are often described as a complete failure. To improve the success rate of these programs, the federal government funded foreclosure-counseling programs operated by nonprofit housing counseling agencies.
The local agency providing these services in Southwest Colorado is Housing Services for the Southwest – a nonprofit Housing and Urban Development certified housing counseling agency, as well as a member of the Colorado Foreclosure Hotline and the National Foreclosure Mitigation Counseling Program.
“Many clients have come to our agency after many months of frustration of working with their lender directly. It was, and frankly still is, a cumbersome process, often involving repeated requests by the lender for the same documents, banks failing to return phone calls or providing conflicting information, etc.,” said Housing Solutions programs director Tami Miller. Counselors know the ins and outs of the process and can guide someone through it.
According to the Colorado Foreclosure Hotline statistics, homeowners who seek counseling assistance are two times as likely to receive a mortgage modification. Four out of five homeowners who met with a Colorado Foreclosure Hotline counselor avoided foreclosure. Counselors analyze each homeowner’s financial situation and educate the homeowner about the Colorado foreclosure process, budgeting techniques, workout options and how to communicate with the lender. Miller explains the options available in mortgage modification programs have now been greatly expanded. Homeowners who were turned down or not eligible in the past may now qualify. The general concept remains the same: Modifications restructure mortgages, lowering monthly payments and interest rates, making payments affordable and bringing delinquent mortgages current.
Each state has different rules about foreclosures. Colorado law allows for both judicial and non-judicial foreclosures. Non-judicial foreclosure essentially means the borrower has agreed in advance the lender can sell the property to pay off the balance of a mortgage in default, with the result being that foreclosures can happen more quickly. The foreclosure process in Colorado is unusual in that the public trustee in each county facilitates the foreclosure process.
There is some additional good news. Colorado received substantial funds from the national mortgage settlement as a result of the states’ attorneys general lawsuit against the five largest mortgage providers, which service almost two-thirds of all mortgages. The $25 billion settlement resulted from a lawsuit alleging improper lending and foreclosure practices by the banks.
Colorado is one of a handful of states earmarking 100 percent of their custodial funds from the settlement, totaling $51 million, to foreclosure prevention and housing programs. The Colorado attorney general’s office reports, as a result of these efforts, “$425 million in permanent cost savings through loan modifications have helped 7,500 Colorado homeowners avoid foreclosure.” The state has created two supplemental programs for those in special circumstances, including the reinstatement program, for borrowers who suffered a one-time setback (such as a medical emergency) and the modification assistance program (currently only available for Wells Fargo loans) designed to reduce the principal balance by creating a no-interest, no-payment second loan to allow for a mortgage modification to be approved.
The best time to consider a mortgage modification is as soon as the mortgage is delinquent and before the foreclosure process has begun. The first step is to contact your lender and explain the situation and immediately make an appointment with a HUD-certified housing counselor. In Southwest Colorado, contact Housing Solutions for the Southwest at 259-1086.
Housing Solutions is the one-stop shop for housing services for those in need in Southwest Colorado. It is the only agency in the region offering comprehensive housing services in conjunction with case management. Housing Solutions has served this region for more than 32 years and handles more than 6,000 client inquiries every year. Housing Solutions offers counseling in foreclosure prevention, reverse mortgages, pre-purchase, emergency homeless prevention, rental and utility assistance, transitional housing, home rehabilitation and repair, emergency heating repair and replacement and services for the homeless.
Elizabeth Salkind is executive director of Housing Solutions for the Southwest. Reach her at 259-1086 or esalkind@swhousingsolutions.com.
