A large number of homes that entered foreclosure last year along the Front Range could not even cover the first mortgage if sold, according to an analysis by RealtyTrac.
RealtyTrac, a provider of foreclosure listings, used home values and compared them with loan amounts to figure out negative-equity values.
It found that Adams, Arapahoe, Denver, Weld, Pueblo and Jefferson were the six counties that had homes in foreclosure with the highest amounts of negative equity.
In Adams County, 29 percent of home owners owed more on the mortgage in foreclosure than the value of their home. There were 14 cases RealtyTrac captured where the borrower was in the hole $100,000 or more.
In Arapahoe County, it was 25 percent, with eight cases where the deficit was $100,000 or more.
A large negative-equity position makes it more difficult to refinance or sell a home or negotiate with lenders.
It also reduces a borrower’s motivation to fight to keep the property, said Zachary Urban, head of housing counseling at Brothers Redevelopment.
“If someone is paying into an investment that is not gaining them any equity, they are not seeing any real benefit from it,” Urban said.
Increasingly, lenders backing home-equity lines and second mortgages don’t even bother to initiate a foreclosure because prospects for a recovery are minimal, given the costs involved, Urban said.
Values have fallen so far that some banks are starting to limit or freeze home-equity lines in the metro area to protect themselves.
Growing losses on even first mortgages could make financing more difficult to find.
“All of the rules have been thrown out as far as risk is concerned,” Urban said.
The National Association of Realtors, after forecasting a stabilizing of the market this year, estimates first-quarter median home values will fall 6.1 percent and that home sales will be down 4.3 percent this year.
Aldo Svaldi: 303-954-1410 or asvaldi@denverpost.com
