LONGMONT — Some kick in doors, smash windows, cart off appliances, pocket plumbing fixtures and abandon the place a filthy mess. Others leave the keys and the garage door opener on the kitchen counter before leaving their lost home spotless and empty.
“There is no typical foreclosure,” said Linn Jensen, broker at Longmont’s River Rock Realty, which specializes in foreclosure.
But when challenging circumstances — chiefly drug abuse, divorce, death and unemployment — cause a property owner to default on a loan, the foreclosure industry still needs a bevy of businesses to mop up to one degree or another.
The financial collapse of a borrower sets lenders and attorneys into motion. But a long entourage of others pick up the pieces, too, Jensen said. They include building inspectors, professional property services, waste-removal haulers and remodeling contractors along with those who board up and winterize a place and those who go in to spit-shine it just before resale.
“The bank has a lot of investment in the property, and they don’t want to find pigeons or homeless people in there,” Jensen said. “Whoever specializes in the foreclosure industry has definitely gotten busier.”
A record-breaking 487 foreclosures occurred in Boulder County last year, according to Boulder County Public Trustee and former county treasurer Sandy Hume, the third party overseeing statutes governing the process.
Despite the economic recovery, foreclosures historically lag behind other recession-related red flags for bearing the accumulation of personal and societal economic woes.
County statistics reflect that. During the first quarter of 2003, 95 foreclosures were filed.
This year’s first quarter closed with 136 foreclosures on the trustee’s books.
“No one wants this to happen. But life gets tough — sometimes beyond repair,” Hume said.
Though the U.S. Department of Housing and Urban Development only guarantees loans, foreclosure forces it to inventory properties, said John Carson, HUD’s Denver-based regional director.
And this rate also reflects a trending-up foreclosure rate.
In January and February 2003, 92 of the roughly 137,000 HUD guaranteed loans in Colorado went into default and slipped into the program’s inventory, he said.
This year at the same time, the inventory hit 172 properties.
The ripple now reaches everyone from lenders to locksmiths.
Only about 5 percent of his loan business comes from refinancing properties in foreclosure, according to Nate Burns, a senior loan officer at AACE Mortgage Services, LLC just north of Berthoud.
Besides considering compensating factors such as the troubled borrower’s credit score, employment status, other assets and credit history, he looks at the big picture.
“It’s more of ‘make sense’ kind of a thing,” Burns said. “Did he just lose his job three months ago?”
If the financial, mortgage-related crisis seems temporary and the owner already has sunk a minimum 20 percent equity into it, Burns may help the owner buy the note from the original bank to prevent foreclosure.
“There’s no standard formula, but the interest rate is going to be quite a bit higher because of the risk involved,” he said.
For example, on a 30-year fixed mortgage with a 5.7 percent interest rate, buying back the note could involve an interest rate twice that amount.
Alan Embree, owner of Master Locksmiths and Safe Service in Longmont, also has dabbled more in foreclosure-related work lately.
“We used to do one every couple of months for Realtors and banks,” he said. “Now, it’s two or three times more.”
Deal-hungry investors scout these properties and then typically hire property management companies to get them up to snuff for resale, according to Bob Saint Clair, owner of Property Management Plus Inc., a Longmont residential and income property management company.
Last month, his company spruced up two foreclosure properties for about $5,000 a piece. Industry standard, he said, is a about $15,000 a property.
He has contracted as much as $50,000 to improve a trashed foreclosure property in Erie.
But whatever the ticket, foreclosure-related work has picked up enough for him to refocus his attention on this niche for the time being, he said.
“How long are we going to be able to ride this horse? Well, hopefully not too long,” Saint Clair said. “But I see the potential over the next six months, more than I have seen up to this point.”
The reverse mortgage industry represents another niche mushrooming along with the foreclosure rate.
This option allows those age 62 or older to tap equity in their home much like a home equity loan, but without needing to repay. Instead, the money is recovered when the owner sells the property upon moving or dying.
Using this tool to avoid foreclosure or free up cash for other purposes does eat at what would otherwise be inherited by survivors. But the most popular type of reverse mortgage, called a home equity conversion mortgage, jumped 112 percent nationally for the six-month period closing Feb. 29, 2004, according to reports issued by the Washington, D.C.-based National Reverse Mortgage Lenders Association.
Joyce Perry, a Longmont-based reverse mortgage specialist with Financial Freedom, an Irvine, Calif.-based subsidiary of Lehman Brothers Bank and the largest originator of reverse mortgages in the United States.
“This gives people some dignity, where they don’t have to ask their children for help,” she said.
One woman she counseled recently signed on the dotted line after learning more about this option, one blossoming in the shadow of foreclosures.
“By tapping into the equity she was sitting on, it gave her back tax-free dollars, which would not alter her Social Security or Medicaid benefits,” Perry said.
“It’s a win-win situation. There’s nothing better than helping people get money. I’m everybody’s friend.”
Pam Mellskog can be reached at 303-776-2244, Ext. 224, or by e-mail at email@example.com.