Telluride Real Estate

Posted by: Erin Eddy

www.ourayland.com
www.ridgwayland.com

Foreclosure Filings Up Throughout County
by Karen JamesOct 23, 2008

All Market Segments Affected

TELLURIDE – With two months remaining in the fiscal year, foreclosure filings in San Miguel County are up 47 percent compared to the 2007 year-end total, county records show.

The county has opened 28 foreclosure files since January, of which seven – or 25 percent – have occurred during the last three weeks.

The county opened a total of 19 files during fiscal year 2007.

“We’re already past last year and we’re just in the first month of the fourth quarter,” said County Treasurer, Public Trustee and Public Registrar Janice Stout. “I’m just amazed with the number we’ve had.”

Among the 19 filings in 2007, a total of six – about 32 percent – eventually sold in foreclosure auctions.

This year, two of the 28 properties have been sold at auction. Another three are scheduled to go to auction before the end of the year if they are not first withdrawn, cured or continued.

Despite the overall increase in filings, with so few sales scheduled in the next two months, 2008 foreclosure sales cannot outnumber those in 2007.

But considering that 12 foreclosure sales could take place by the end of next February if they are not somehow remedied, 2009 could run the risk of producing a bumper crop of foreclosures.

“Maybe 09 will be record sales,” Stout said.

Among this year’s 28 filings, 10 – or about 36 percent – have been withdrawn or cured. One more, a filing for the Rosewood Telluride Resort and Hotel, is on hold until further notice.

In June, Lot 129, LLC and West Galena Holdings, owned by New York City-based developer Aaron Honigman, filed for Chapter 11 Bankruptcy protection one day before the property was to appear on the auction block. As a result, a week-to-week stay of the foreclosure has been in place since then, which Stout will continue to impose until otherwise directed by the court.

Outstanding principal on the Rosewood deal, a pre-construction bridge loan, is $50 million.

“There does seem to be a rush of filings,” said Stout, adding that she believed the accelerated filing pace will continue if the economy remains in its current state.

That said, a relative few of those are likely to result in foreclosure sales if history serves as an accurate predictor.

The filings span across virtually all segments of the real estate market. They range from a fractional interest in Mountain Village with $40,000 in outstanding debt, to a Mountain Village Home against which two foreclosure filings worth a total of about $10.1 million have been made.

According to Stout, the first foreclosure was filed on a deed of trust where the home was put up as collateral to guarantee a loan to a business. The second foreclosure was filed on a mortgage on the home itself.

In between those extremes are filings for Hastings Mesa and Norwood homes, an Ice House condominium and two vacant lots in Mountain Village among others.

“It’s pretty much across the board,” Stout said.

She speculated that one reason for the steady rate of foreclosure filings over the past few weeks could be the passage of Colorado House Bill 08-1402. The bill, which took effect on Aug. 1, requires that mortgage lenders provide the direct telephone number of their loss mitigation departments, and that of the Colorado Foreclosure Hotline, to buyers in danger of being foreclosed upon at least 30 days before the relevant paperwork is filed.

Stout said she received no filings during the month of August as the law took effect, which probably created a backlog that is working itself out now.

“People that were living with a high amount of debt are going to be the first ones to go,” said Matthew Hintermeister, a real estate agent, who noted the presence of several multi-million dollar properties on the foreclosure list.

Hintermeister, past president of the Telluride Association of Realtors, speculated that when the Dow Jones Industrial Average plummeted nearly 3,000 points over three weeks toward the end of September, cash flow may have been disrupted for investors who, through margin accounts established with brokerage firms, had taken out loans using securities as collateral.

Although investors can borrow against the value of his or her securities through margin accounts, a minimum of equity must be maintained in them. If the value of the pledged securities were to fall far enough – as would likely have been the case during those tumultuous weeks – a “margin call” would require the borrower to sell off securities or deposit cash (cash that may have otherwise been paying the mortgage on a second home) or perhaps do both – in order to replenish the account equity.

The brokerage retains the right to sell the pledged securities and may not be required to consult the margin account holder before doing so, according to Investopedia.com, an investor education website owned by Forbes Media. In fact, the website goes on to state that the firm may also have the right to sell the securities before the investor has been given a chance to meet the margin call.

“It can happen incredibly fast,” Hintermeister said.

Hintermeister added that some Aspen area real estate brokers with whom he recently spoke told him that they are seeing people abandon large deposits – some worth hundreds of thousands of dollars – on projects that are still being completed.

“They’ve already told brokers that they are prepared to walk away because they don’t have the money to close,” he said.

“That’s big money to be walking away from.”