Video Story
Watch VideoColorado targets foreclosure issue
Story By: Bill Folsom
Source: KOAA
Published Mon Dec 17, 2007, 10:15 PM MST
Updated Wed Jan 09, 2008, 11:38 AM MST
Home foreclosure continues hitting hard in Colorado. To counter the problem several new laws were created this year to regulate the mortgage industry. Erin Toll, Director of Colorado’s Division of Real Estate says, “The way of getting a loan a year ago is not the way it is today. The whole universe has changed.
Referring to the number of foreclosures in the state, the word coming from the state capitol is "epidemic." In the first nine months of this year a new foreclosure filing record was set with over twenty-eight thousand nine hundred. The previous high for a full year was in 2006 at just short of twenty-eight thousand five hundred. By the end of the year it is projected the number could reach thirty-seven thousand.
Toll blames much of the problem on adjustable rate loans and a portion of those mortgage contracts called prepayment penalties. She says, “When their payment doubles or even quadruples and they attempt to refinance or sell their house they get a prepayment penalty.“ It’s a lose, lose situation. They can’t afford the adjusted mortgage rate, and they can’t afford the prepayment penalty for either selling the house or trying to refinance. They end up facing foreclosure.
This year Colorado legislators passed numerous laws regulating the mortgage business. Governor Bill Ritter wants state regulators to “aggressively” implement and enforce them.
An emergency rule on prepayment penalties has just been enacted by Toll. The new rule prohibits prepayment penalties that extend past the adjustment date of an interest rate, teaser date or payment rate. With laws passed this year “One of the provisions says that mortgage brokers have the duty of good faith and good dealing to all borrowers,” according to Toll.
The rule won’t ease current foreclosure numbers because laws can’t be retroactive. The hope is lenders will recommend loans to borrowers that won’t end up in foreclosure in days ahead.
