According to the latest government data, only 1,072 permanent loan modifications have been made to  homeowners in the Denver area (and throughout Colorado) facing foreclosure.  When you consider that so many more families are struggling in our state, that is barely making any impact at all. 

Put into perspective, the latest report from the federal government shows that as of the end of December, there were 11,170 homeowners in “active trials,”  for loan modifications. These trial modifications are required before the loan can be made permanent.  In the nation, Colorado ranked 19th for the number of active trials and permanent loan modifications, and our 1,072 permanent loan modifications represents 8.8% of the trials.  The goal is to provide 3 to 4 million homeowners across the nation with lower mortgage payments through 2012.  Nationwide, at the end of 2009 there were 787,221 trial modifications and 66,465 permanent modifications.

Unfortunately, banks do not have much incentive to participate in the program.  Consider this example: if a bank writes down a loan so the borrower saves $700 a month for two years, the bank needs to write off $16,800 – 24 times $700.  Arguably, the bank is not taking a loss – but it is making less interest on the loan.  Typically, over the long run, it actually hurts a bank less to let the home go into foreclosure, and become an REO property (Real Estate Owned).  Although foreclosures are expensive, most banks would rather put off the cost to the future, than to take an immediate hit to the bottom line.  And that is just what many are doing.

In addition, those banks that are willing to modify loans permanently have been swamped with a huge volume of requests.  The wave of temporary modifications began last summer, and many of them only became permanent in the past two months.  The good news is that analysts predict a big surge in permanent modifications in the next few months, as banks are streamlining the process and homeowners are taking more initiative to follow all of the bank’s procedures accurately and on time.

If you’re a Denver homeowner facing foreclosure and could benefit from a loan modification, be sure to communicate clearly with your bank and follow all of their guidelines within the prescribed time frames.  Also, contact us at the Bandy Team to find out how we can help.  We are your local real estate experts, and are ready to assist you with all of your Denver area real estate needs.

Marianne Bandy
Avoid Foreclosure in Denver

A recent Coldwell Banker survey of 1,000 homeowners across the nation shows that savvy consumers are cashing in on the new and improved homebuyer tax credit and helping fuel the economic recovery.  Colorado homeowners and homebuyers are part of this smart group, and, as a result, we will surely see a boost to our local Denver area real estate market!

Among those surveyed, 83% said if they purchased a home and qualified for the tax credit they would engage in "smart spending," and only 6% said they would use the money for luxury items such as a vacation or shopping. 

The survey found that most consumers would spend their tax credit to:

• Pay off debts(34%).
• Make home improvements and potentially increase the value of their home and home equity (29%). 
• Put into savings and investments (28%).

When consumers pay off debt, they afford themselves more spending power.  Investing in home improvements also create more equity in their homes, increasing their ability to spend.  Further, when consumers increase their savings and investments, that generated income brings increased confidence. 

The survey also found that, after learning about the tax credit expansion, 20% of those surveyed said they were more likely to consider purchasing a home than they were six months ago.  Much consumer spending is fueled by the housing market -- provided the housing market is energized, and that was precisely the idea behind the homebuyer tax credit and its recent extension and expansion to include repeat buyers (instead of only first-time buyers). 

In October 2009, before President Obama signed the latest extension and expansion, more than 1.2 million tax returns had claimed about $8.5 billion in the refundable tax credit, for both new and resale homes - according to the Treasury Inspector General for Tax Administration (TIGTA).

The new law extends the $8000 tax credit for first-time homebuyers, as well as creating a $6500 tax credit for existing homeowners who buy a new primary residence through April 30, 2010.  The new rule also raises the qualifying income limits to $125,000 for single taxpayers and $225,000 for joint taxpayers, from the current $75,000 and $150,000.  The maximum allowed home purchase price is $800,000.

For more information, visit the Internal Revenue Service (IRS) website, as well as its question and answer page.

Whether you’re thinking of buying or selling a home in the Denver metro area, contact the Bandy Team for all of your real estate needs.  We are your local Denver real estate experts, and we will guide you every step of the way!

Marianne Bandy
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