Colo Leads Rising Foreclosures

During the third quarter, 318,355 properties entered some stage of foreclosure nationwide, RealtyTrac announced its latest U.S. Foreclosure Market Report showed. The number is 17 percent higher than in the prior quarter and 43 percent above the third quarter 2005.

The rate of foreclosure activity during the quarter was at one foreclosure filing for every 363 households during the quarter, slightly higher than the second quarter’s rate of one foreclosure filing for every 425 households, according to RealtyTrac, which claims it publishes the largest and most comprehensive national database of pre-foreclosure and foreclosure properties.

“Higher interest rates and a general softening of the real estate market are the two key factors contributing to” the annual increase in foreclosure filings, said James J. Saccacio, RealtyTrac chief executive, in the announcement. “What our third quarter research appears to be showing is that the first wave of adjustable rate mortgages is having a negative impact on the number of homes going into foreclosure. With the volume of these loans — more than $1 trillion of them due to adjust over the next 15 months — this is a trend that definitely bears watching.”

For the second consecutive quarter, Colorado had the highest foreclosure rate, with one new foreclosure filing for every 127 households — 2.9 times the national average, the online foreclosure listing service reported. There were 5,561 Colorado properties in some stage of foreclosure during the quarter.

Colorado has been at the forefront of foreclosure talk.

The Better Business Bureau recently told MortgageDaily.com that it believes “misleading advertising is a direct contributor to people getting into loans that they cannot afford and that explains the high foreclosure rate in Colorado.” State officials started an investigation of certain mortgage companies to stop alleged deceptive advertising.

The Colorado Mortgage Lenders Association, however, recently released a report in which it stated that sources in the business of selling foreclosure data may serve their marketing plan by reporting only the number of foreclosures and not how those numbers relate as a percentage of population, number of homes, or number of mortgage loans.

The association noted that the percentage of loans in foreclosure is far lower than in the third quarter 1989, the “worst time” in Colorado history for residential mortgage loan foreclosures. In the third quarter 1989, 3.1 percent of Colorado loans were in the foreclosure inventory, or 8,923 loans, compared to 1.2 percent, or 11,839 loans, in the second quarter 2006.

The trade group explained that Colorado’s population has jumped by about 42 percent from the third quarter 1989 to an estimated 4.7 million as of 2005. The number of mortgage loans reported in the state has surged by about 334 percent since that time to 978,405 in the second quarter 2006.

“With 685,859 more loans reported, the total number of foreclosures in today’s flat real estate market is only 2,916 higher than during the third quarter of 1989,” the association said.

Nevada, which in the second quarter had the sixth highest foreclosure rate, moved up to the second highest, with one new foreclosure for every 156 households.

Meanwhile, Florida, which had the ninth highest foreclosure rate in the prior quarter, took Texas out of the No. 3 spot. with one new foreclosure for every 182 households.

The three states with the lowest foreclosure rates during the quarter were Vermont, with one foreclosure filing for every 49,064 households, followed by New Hampshire’s rate of one for every 11,639 and Maine, with one out of every 8,809, according to the report.

Florida’s 40,136 properties in some stage of foreclosure accounted for the nation’s highest number of foreclosure filings for the quarter and bumped Texas, which had held the top spot in the previous two quarters, to No. 2, with 39,363, and California followed in third, with 37,317, RealtyTrac said.

“While the overall number of foreclosures represents a return to more or less normal levels, there are pockets of the country that are being hit more severely,” Saccacio noted. “States with underlying economic issues, such as high unemployment or depreciating home prices will continue to outpace the rest of the country in the total number and rate of foreclosures.