Colorado Foreclosure Update

Here is something I’d like to know. How many investor-owned properties were foreclosed in 2007? What about the first half of 2008? My theory is that speculators getting zero-down, stated income, non-owner occupied, negative amortizing loans contributed more to the unraveling of the credit markets than primary homeowners who got a low rate adjustable mortgage. But here’s the rub, where is the the data that supports my theory? It’s not measured!

RealtyTrac just announced that Colorado fell to 10th place in September for foreclosure data. The story can be read here

RealtyTrac reports seem more self-serving than a societal benefit. RealtyTrac caters to foreclosure bargain hunters. Reporting these statistics gets RealtyTrac lots of love in the news and the blogosphere and the resulting sensationalism feeds their business model by driving new customers to their service.

The problem is that their reporting methodology results in inaccurate measurements and comparisons. There are instances when some Colorado homeowners get counted twice or three times in the RealtyTrac reports, thereby inflating Colorado statistics.

Is this harmful?

Garbage in, Garbage out. Tracking, measurement, and interpretation of foreclosure data is the key to reducing the instance of future defaults. Reports that pay little attention to process and that utilize inconsistent datapoints contribute to the problem. This results in hastily crafted laws that fail to address the real cause(s) behind the problem.

Many states have passed new foreclosure laws designed to assist homeowners in trouble. This has increased the inconsistency among the various data sources that RealtyTrac relies on for information.

How does this affect you?

Homeowners pay for foreclosure losses in the form of higher interest rates. Without specific measurement of each default, the lessons to be gained from this credit market failure will be missed.

RealtyTrac contributes to the problem by providing skewed analysis. This analysis is picked-up by the media and subsequently becomes the public conscious with respect to causation. It’s not in RealtyTrac’s long-term interest to help identify and reduce the cause(s) of foreclosure but they are in a unique position to bring more understanding to the problem by measuring accurately. I wish they would. Regards ~ JB