A consumer advocate warned Colorado real-estate professionals Wednesday that homeowners nationally may be headed for a devastating round of foreclosures.
“We are very concerned that we are going to see a foreclosure rate the likes of which we have never seen before,” said David Berenbaum, executive vice president of the National Community Reinvestment Coalition.
Berenbaum cited several factors that put a growing number of homeowners at risk:
Pressures from lenders that have caused appraisers to overvalue homes, securing trillions of dollars of loans.
Interest-only and other exotic loans that give home owners little or no equity.
And the huge numbers of adjustable-rate loans whose monthly costs are about to jump.
“That adjustable date is coming for many, many consumers,” he said.
Berenbaum, whose group advocates economic justice in housing, spoke at a day-long seminar on mortgage fraud in Colorado, which has had the highest home-foreclosure rate in the nation for seven months. Several speakers cited fraudulent purchases, along with widespread pressures from lenders and brokers on appraisers to overvalue houses, as factors in Colorado’s foreclosure epidemic.
Jan Zavislan, the Colorado attorney general’s consumer-protection chief, suggested an anti-predatory-lending law may need to be changed “to include some of the costs that are paid outside of closing,” such as fees that reward brokers for selling high-interest loans.
Zavislan said his office is investigating misleading ads that lure buyers, consumer complaints that documents were added to loan files after homes were purchased and a case where all the homebuyers appear to be related through a common employer.
“I’ll be honest with you,” he said. “The problem is bigger than all the law enforcement agencies in the state put together.”
Some participants complained that when they do report loan fraud, state agencies fail to respond.
“Has your office filed any charges in the last three years?” Denver lawyer John Head pointedly asked Zavislan.
“It’s not an illegitimate criticism,” Zavislan replied.
He said his office lacks resources to investigate every complaint and is focusing on people who draw multiple fraud complaints.
“It’s really been in the last 10 or 12 months that we have seen names come up over and over again,” he said.
Sonya Leonard Leonard, who owns a real-estate firm, said her own industry is guilty of various practices that can put a false value on a house, from counting basement space in the listed square feet to undercounting how long it has been for sale.
She told Zavislan she had complained to several state agencies and the FBI when the prospective buyers of one house wanted her to raise the price from $499,000 to $625,000 and kick back the difference to a third party.
Jon Goodman, a Boulder real-estate lawyer, suggested two ways that mortgage fraud could be reduced without new laws or regulations.
Appraisers, who are forced to choose “between eating well and sleeping well,” should be randomly selected, he said, not chosen by a lender. And the lending industry could send out testers posing as “dumb buyers” to identify people who are helping to create fraudulent home loans.
Staff writer David Olinger can be reached at 303-954-1498 or at dolinger@denverpost.com.
