Linked to variable interest rate loans and real estate frenzy
The year is only half over, but the number of properties in the foreclosure process so far is close to double the total number of foreclosures in 2007. Some experts believe the problem is related to the national mortgage crisis and a spike in variable interest rate loans, as well as poor investment choices made during a real estate boom that occurred several years ago.
There are currently 45 properties throughout Gunnison County that have already foreclosed or are in foreclosure proceedings, according to Gunnison County deputy public trustee Teresa Brown. The county’s listings include municipalities, unincorporated and outlying areas of the county such as Marble and Pitkin.
Last year there were 26 foreclosures in the county. “It’s definitely up. We haven’t had this many since the 1980s. We’re really hoping it doesn’t go there,” Brown says.
In 1987, there were 132 foreclosure proceedings in the valley.
A foreclosure is the legal process in which a mortgage lender forces the sale or auction of a property to recover any loan amounts that the homeowner has been unable to pay.
The Gunnison County public trustee’s office handles foreclosure proceedings as a facilitator between the attorneys who represent banks and the homeowner. “We make sure everyone is doing everything legally and sticking to the statutes,” Brown says.
Brown says the current 45 foreclosure proceedings are split evenly between the north and south ends of the valley. There are currently 12 foreclosures in the Crested Butte area, including Crested Butte South and the town of Crested Butte. In Mt. Crested Butte, there are eight foreclosures.
According to Brown, the foreclosure proceedings represent a mix of single-family homes, condominiums and vacant lots.
Brown says the county does not have the information to determine whether the particular properties are primary residences or second homes.
Gunnison County deputy assessor Vicki Hildreth says while there may currently be a number of foreclosure proceedings, the number that have been concluded is still average. That’s because the banks and homeowners often fight hard to sell the property before it’s auctioned off. “We have processed some. But I don’t know that we’ve seen a high number,” Hildreth says.”
Brown says the weak economy and the national mortgage crisis are being felt locally, as many of the foreclosures in the county are the result of homeowners being unable to keep up with adjustable interest rate loans that have risen dramatically over the past year. “That’s the cause of most people’s problems,” Brown says. She said the county did not have enough information to determine if the recent increase in property values and associated taxes, and/or other local factors were contributing to the spike in foreclosures.
Local real estate agent and Mt. Crested Butte mayor William Buck says during the real estate boom in 2004 and 2005 after Tim and Diane Mueller bought the ski area, many people looked to make quick investments in the local market. The recent increase in foreclosures, he says, could be because “people got over-extended.”
“They figured the market would turn over quickly. It did once or twice, but that window closed pretty quickly.” Buck knows a family with three properties on the market, all listed for less than what they were originally purchased for.
However, Buck says the Crested Butte area is faring differently from other communities affected by the mortgage crisis because of the resort and the many second-home owners. “If you look at the overall rate (of foreclosures), it’s far lower here than other places in the country,” Buck says. He says this may be because many second-home owners have greater financial resources than the average single-home owner. “They’ve got a better cash position.”
Brown says there aren’t really any state or local programs to help a property owner through the foreclosure process, but the county Housing Authority offers home buying and financial advice in an effort to prevent foreclosures.
The 110th Congress is currently considering a bill known as the Expanding American Home Ownership Act. The act would spur a sweeping reform and additional funding for the Federal Housing Administration, an agency that has helped millions of Americans find permanent housing through secure and manageable loans.
Buck says it may take a few years for the increase in foreclosures to settle out. “Realistically, two years. I think we’ll get a little traction this summer… I think smart money is getting into our market. People are realizing it’s a long-term investment plane. The quick flips are short-lived.”