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For years, Jim Schumacher, whose deeply weathered skin and oil-stained hands speak to a long career of hard work and physical labor as a construction worker and handyman, has done all he could to avoid falling victim to a wave of home foreclosures sweeping Northern Colorado. But on Wednesday morning, the inevitable finally caught up to him and the house he lived in for years was sold in foreclosure proceedings.
To say the moment was anticlimactic is an understatement. His home in the claustrophobic and ramshackle Countryside neighborhood near Timberline and Mulberry roads was on the Larimer County Public Trustee’s auction block along with two other foreclosures, offered for sale to the highest bidder after months of mortgage payment defaults. The process was simple and quick. Debbie Morgan, the county trustee, read the property’s address and the minimum amount needed to satisfy the bank and then asked for bids. The question hung in the lobby of the trustee’s building on Oak Street for a moment or two and, seeing that none of the half-dozen investors and observers who’d gathered for this weekly event seemed interested in Schumacher’s home, ordered it sold back to the bank holding the note.
The whole process took barely 30 seconds.
Schumacher himself had no idea. He learned that his home had been sold from a reporter. Flicking cigarette ashes into a sink full of dishes, his immediate response was, “Oh, did it?” although he didn’t seem especially surprised. The foreclosure wasn’t levied against him personally; to avoid this fate years ago, when he’d fallen critically behind on house payments in the wake of a divorce, he sold the house to a real estate agent who charged him rent to live there. In turn, the real estate agent sold it to husband-and-wife investors who acted as Schumacher’s landlords.
The landlords were the ones who fell behind on the payments this time. As a result of the foreclosure, they will lose money and suffer a bruising blow to their credit. But it’s Schumacher and his two children who live in the home who will feel the pain most directly.
“I have no idea how this will affect me,” he said, adding that he guesses he will be evicted.
The story of this property’s foreclosure offers a compelling glimpse into the economic chain reactions that began months or even years ago and result in property losses that are rippling throughout the region, the state and the country, leaving in their wake battered credit ratings and shattered lives.
Joan, Schumacher’s Fort Collins landlord who asked that her full name not be used, said it has nothing to do with an unwillingness to make payments or bad investment decisions, as some politicians and media outlets would have you believe. Instead it’s a symptom of a sagging economy that reaches into many corners.
In her case, the downturn in the construction industry led to Schumacher’s home being sold at foreclosure.
Joan and her husband bought the house three years ago for between $140,000-$150,000 as a rental investment. At the time, Joan’s husband owned his own masonry and bricklaying business. Money was good, business credit was easy to come by and the deal seemed like a wise investment for the future.
“We got one of those no-money-down, interest-only deals,” she said. “It made a lot of sense at the time. We didn’t realize it wasn’t going to cash flow.”
Part of the problem was that they allowed Schumacher to pay less in rent than the monthly mortgage payments, but Joan and her husband still considered it a good deal based on their hope that the property would appreciate in value and they would be able to refinance their adjustable-rate mortgage (ARM) loan into something more affordable before it adjusted.
Before that happened, however, the ARM on Joan’s own house adjusted and their mortgage payment increased by about $400 a month; subsidizing Schumacher’s rent became considerably more difficult. Then, in late 2006, a developer skipped out on a $70,000 payment he owed Joan’s husband. He sought a business loan to keep things afloat, but for the first time, the bankers turned a critical eye on the construction industry and demanded personal collateral. They put up some property they own near Carr, but the masonry and bricklaying became harder to find in early 2007 as construction projects cooled off. Under a crush of bills and loan payments, Joan’s husband was forced to shutter his business. He now commutes from Fort Collins to job sites in Cheyenne and Laramie. A small bulldozer that they can’t sell is parked in Joan’s driveway, a testament to the tough times all around.
Knowing that the mortgage on the rental was going to adjust upward in early 2008, Joan and her husband have been trying to refinance the mortgages on both houses and their Carr property for the past three years. With her husband making far less money as an employee in a fickle industry, they’ve had no success. Now living paycheck to paycheck, Joan said, “We’ve been behind or not making payments since last summer (on the rental house).”
“It’s kind of a toss up,” she said of the construction industry. “You get what you get, and when it’s snowing, you get nothing.”
Worse, her tenant was in the same boat. Schumacher works odd jobs and runs a handyman service called All Around the House. Joan said he hasn’t made rent payments since December. She could evict him, but by this point, she figured it wasn’t worth the hassle.
“It’s not going to matter if we kick him out,” she said. “Besides, we’re in a similar situation. As a construction family, I wouldn’t want to be kicked out on the streets.”
Joan said she “doesn’t feel too good” about the house being sold, particularly when she reads the newspapers and hears politicians blaming people like her for getting in over their heads. The loan industry should bear its portion of the responsibility for the rise in foreclosures, she said.
“The people presenting these loans, they’re supposed to be the professionals,” she said. “There isn’t a person in Fort Collins who didn’t get a postcard in the mail every week telling them to refinance, or ‘now’s the time to buy.’ They’re the experts in the field telling you you can afford this.”
***
Foreclosures bring out another kind of professional in the real estate field, one who stands to profit handsomely from situations like that of Joan and Schumacher. At the trustee’s auction Wednesday was an unlikely looking investor who scanned the list of properties in various stages of the foreclosure process with an eye toward making a quick and easy buck. Devon Dennis, a slightly-built 21-year-old is the vice president of operations and acquisitions for Crosswood Investments LLC. He gave up his pursuit of a mechanical engineering degree to “solve real estate problems,” according to his business card.
“I wanted to know what rich people did and do that,” he said. “I quit school to do this.”
Part of his business, he said, is to mine the foreclosure notices like those kept in three-ring binders at the trustee’s office, contact property owners facing foreclosure and offer to intercede on their behalf with the lender, or repair their credit.
“I want to help keep people in their homes,” he said. “I want to talk to homeowners before they get to this point.”
But a more lucrative aspect of his business comes from what is called “short selling,” in which he buys houses in foreclosure at what can be a staggering discount directly from the bank. Essentially, he will offer the mortgage holder about half—or less—of what is owed by the original homeowner. Taking such a hit is often more attractive than getting stuck with a property that, if it’s in foreclosure and close to the public sale date, probably can’t be sold on the market for anywhere near what is owed the bank. Mary Jane Rogers, the regional spokeswoman for JPMorganChase, said there are a number of unwanted expenses associated with owning a foreclosed property that banks would rather do without, including property taxes, legal fees, maintenance costs and marketing costs. It depends on the situation, but short selling is often more attractive and less expensive to a bank than going through with the foreclosure.
In short-selling transactions, buyers like Dennis can then sell the house for a tidy profit.
“It’s instant money,” Dennis said.
Of course, he can also buy foreclosed homes at the auction by bidding on them. In those situations, the starting price for a foreclosed home is set by the lender, which usually equals the amount of the outstanding loan plus any attorney’s fees the lender has incurred during the foreclosure process. The homes can sometimes be had for a song, but such transactions not only require cash or certified funds in the total amount of the sale that same day, but astute research on the part of the bidder. The property might be encumbered with liens, or it may be located in a down-and-out neighborhood where property values are lower than the minimum bid price. Dennis is new to Fort Collins and hasn’t yet bought any properties at the foreclosure sales. But he goes to the trustee’s office every week and pays 25 cents a page for copies of all the latest notices, and then researches the properties at the county clerk’s office to see which ones could make good investments.
He said he’ll probably bid on something in May, and he won’t be alone. May 14 marks the first public auction date for foreclosures filed in 2008; new regulations are in effect for those homes that take away some of the risk for investors like Dennis. Under the rules applicable to foreclosures filed in 2007, homeowners could still buy back their houses during a certain time-frame after it had been sold at public auction. Those who successfully bid on a foreclosed house had to wait out the 75-day “redemption period” before the sale was final.
Under the new regulations, homeowners have a longer period of time to get their loans current before their house is sold, but there is no redemption period after the sale except for lienholders. The statutes were changed, according to Denver attorney Deanne Stodden, whose firm Castle, Meinhold & Stawiarski handles a large number of foreclosure cases, to prevent fraud during the redemption period. The trustees’ association that lobbied for the change saw a number of instances where “investors” would swindle distraught homeowners out of their houses by convincing them to sign liens or quit-claim deeds, promising that they could stay in their homes as renters or some other ruse.
Therefore, under the new regulations in effect since Jan. 1, if a house is free of liens, it belongs to the highest bidder on the day of the foreclosure sale.
“That’s good for the investor, but not good for the homeowner,” Dennis said.
As for Joan, she said she and her husband have a certain sense of fatalistic relief underscoring the sadness of losing their investment property.
“The value (of the house) is less or equal to what we paid for it and with an interest-only (loan) and an ARM, there’s no equity and you can’t refinance,” she said. “My husband is very relieved because we’ve been under tremendous financial pressure for the past year and a half. ... I need money to buy some food for my kids.”
And as for Schumacher, he has no idea what the immediate future holds, but he suspects he’ll find out soon.
“Apparently, I’m going to have to move,” he said.
To say the moment was anticlimactic is an understatement. His home in the claustrophobic and ramshackle Countryside neighborhood near Timberline and Mulberry roads was on the Larimer County Public Trustee’s auction block along with two other foreclosures, offered for sale to the highest bidder after months of mortgage payment defaults. The process was simple and quick. Debbie Morgan, the county trustee, read the property’s address and the minimum amount needed to satisfy the bank and then asked for bids. The question hung in the lobby of the trustee’s building on Oak Street for a moment or two and, seeing that none of the half-dozen investors and observers who’d gathered for this weekly event seemed interested in Schumacher’s home, ordered it sold back to the bank holding the note.
The whole process took barely 30 seconds.
Schumacher himself had no idea. He learned that his home had been sold from a reporter. Flicking cigarette ashes into a sink full of dishes, his immediate response was, “Oh, did it?” although he didn’t seem especially surprised. The foreclosure wasn’t levied against him personally; to avoid this fate years ago, when he’d fallen critically behind on house payments in the wake of a divorce, he sold the house to a real estate agent who charged him rent to live there. In turn, the real estate agent sold it to husband-and-wife investors who acted as Schumacher’s landlords.
The landlords were the ones who fell behind on the payments this time. As a result of the foreclosure, they will lose money and suffer a bruising blow to their credit. But it’s Schumacher and his two children who live in the home who will feel the pain most directly.
“I have no idea how this will affect me,” he said, adding that he guesses he will be evicted.
The story of this property’s foreclosure offers a compelling glimpse into the economic chain reactions that began months or even years ago and result in property losses that are rippling throughout the region, the state and the country, leaving in their wake battered credit ratings and shattered lives.
Joan, Schumacher’s Fort Collins landlord who asked that her full name not be used, said it has nothing to do with an unwillingness to make payments or bad investment decisions, as some politicians and media outlets would have you believe. Instead it’s a symptom of a sagging economy that reaches into many corners.
In her case, the downturn in the construction industry led to Schumacher’s home being sold at foreclosure.
Joan and her husband bought the house three years ago for between $140,000-$150,000 as a rental investment. At the time, Joan’s husband owned his own masonry and bricklaying business. Money was good, business credit was easy to come by and the deal seemed like a wise investment for the future.
“We got one of those no-money-down, interest-only deals,” she said. “It made a lot of sense at the time. We didn’t realize it wasn’t going to cash flow.”
Part of the problem was that they allowed Schumacher to pay less in rent than the monthly mortgage payments, but Joan and her husband still considered it a good deal based on their hope that the property would appreciate in value and they would be able to refinance their adjustable-rate mortgage (ARM) loan into something more affordable before it adjusted.
Before that happened, however, the ARM on Joan’s own house adjusted and their mortgage payment increased by about $400 a month; subsidizing Schumacher’s rent became considerably more difficult. Then, in late 2006, a developer skipped out on a $70,000 payment he owed Joan’s husband. He sought a business loan to keep things afloat, but for the first time, the bankers turned a critical eye on the construction industry and demanded personal collateral. They put up some property they own near Carr, but the masonry and bricklaying became harder to find in early 2007 as construction projects cooled off. Under a crush of bills and loan payments, Joan’s husband was forced to shutter his business. He now commutes from Fort Collins to job sites in Cheyenne and Laramie. A small bulldozer that they can’t sell is parked in Joan’s driveway, a testament to the tough times all around.
Knowing that the mortgage on the rental was going to adjust upward in early 2008, Joan and her husband have been trying to refinance the mortgages on both houses and their Carr property for the past three years. With her husband making far less money as an employee in a fickle industry, they’ve had no success. Now living paycheck to paycheck, Joan said, “We’ve been behind or not making payments since last summer (on the rental house).”
“It’s kind of a toss up,” she said of the construction industry. “You get what you get, and when it’s snowing, you get nothing.”
Worse, her tenant was in the same boat. Schumacher works odd jobs and runs a handyman service called All Around the House. Joan said he hasn’t made rent payments since December. She could evict him, but by this point, she figured it wasn’t worth the hassle.
“It’s not going to matter if we kick him out,” she said. “Besides, we’re in a similar situation. As a construction family, I wouldn’t want to be kicked out on the streets.”
Joan said she “doesn’t feel too good” about the house being sold, particularly when she reads the newspapers and hears politicians blaming people like her for getting in over their heads. The loan industry should bear its portion of the responsibility for the rise in foreclosures, she said.
“The people presenting these loans, they’re supposed to be the professionals,” she said. “There isn’t a person in Fort Collins who didn’t get a postcard in the mail every week telling them to refinance, or ‘now’s the time to buy.’ They’re the experts in the field telling you you can afford this.”
***
Foreclosures bring out another kind of professional in the real estate field, one who stands to profit handsomely from situations like that of Joan and Schumacher. At the trustee’s auction Wednesday was an unlikely looking investor who scanned the list of properties in various stages of the foreclosure process with an eye toward making a quick and easy buck. Devon Dennis, a slightly-built 21-year-old is the vice president of operations and acquisitions for Crosswood Investments LLC. He gave up his pursuit of a mechanical engineering degree to “solve real estate problems,” according to his business card.
“I wanted to know what rich people did and do that,” he said. “I quit school to do this.”
Part of his business, he said, is to mine the foreclosure notices like those kept in three-ring binders at the trustee’s office, contact property owners facing foreclosure and offer to intercede on their behalf with the lender, or repair their credit.
“I want to help keep people in their homes,” he said. “I want to talk to homeowners before they get to this point.”
But a more lucrative aspect of his business comes from what is called “short selling,” in which he buys houses in foreclosure at what can be a staggering discount directly from the bank. Essentially, he will offer the mortgage holder about half—or less—of what is owed by the original homeowner. Taking such a hit is often more attractive than getting stuck with a property that, if it’s in foreclosure and close to the public sale date, probably can’t be sold on the market for anywhere near what is owed the bank. Mary Jane Rogers, the regional spokeswoman for JPMorganChase, said there are a number of unwanted expenses associated with owning a foreclosed property that banks would rather do without, including property taxes, legal fees, maintenance costs and marketing costs. It depends on the situation, but short selling is often more attractive and less expensive to a bank than going through with the foreclosure.
In short-selling transactions, buyers like Dennis can then sell the house for a tidy profit.
“It’s instant money,” Dennis said.
Of course, he can also buy foreclosed homes at the auction by bidding on them. In those situations, the starting price for a foreclosed home is set by the lender, which usually equals the amount of the outstanding loan plus any attorney’s fees the lender has incurred during the foreclosure process. The homes can sometimes be had for a song, but such transactions not only require cash or certified funds in the total amount of the sale that same day, but astute research on the part of the bidder. The property might be encumbered with liens, or it may be located in a down-and-out neighborhood where property values are lower than the minimum bid price. Dennis is new to Fort Collins and hasn’t yet bought any properties at the foreclosure sales. But he goes to the trustee’s office every week and pays 25 cents a page for copies of all the latest notices, and then researches the properties at the county clerk’s office to see which ones could make good investments.
He said he’ll probably bid on something in May, and he won’t be alone. May 14 marks the first public auction date for foreclosures filed in 2008; new regulations are in effect for those homes that take away some of the risk for investors like Dennis. Under the rules applicable to foreclosures filed in 2007, homeowners could still buy back their houses during a certain time-frame after it had been sold at public auction. Those who successfully bid on a foreclosed house had to wait out the 75-day “redemption period” before the sale was final.
Under the new regulations, homeowners have a longer period of time to get their loans current before their house is sold, but there is no redemption period after the sale except for lienholders. The statutes were changed, according to Denver attorney Deanne Stodden, whose firm Castle, Meinhold & Stawiarski handles a large number of foreclosure cases, to prevent fraud during the redemption period. The trustees’ association that lobbied for the change saw a number of instances where “investors” would swindle distraught homeowners out of their houses by convincing them to sign liens or quit-claim deeds, promising that they could stay in their homes as renters or some other ruse.
Therefore, under the new regulations in effect since Jan. 1, if a house is free of liens, it belongs to the highest bidder on the day of the foreclosure sale.
“That’s good for the investor, but not good for the homeowner,” Dennis said.
As for Joan, she said she and her husband have a certain sense of fatalistic relief underscoring the sadness of losing their investment property.
“The value (of the house) is less or equal to what we paid for it and with an interest-only (loan) and an ARM, there’s no equity and you can’t refinance,” she said. “My husband is very relieved because we’ve been under tremendous financial pressure for the past year and a half. ... I need money to buy some food for my kids.”
And as for Schumacher, he has no idea what the immediate future holds, but he suspects he’ll find out soon.
“Apparently, I’m going to have to move,” he said.
Foreclosures in Larimer County
2005: 939
2006: 1,253 2007: 1,577 2008 to date: 506 Source: Larimer County Public Trustee Note: These figures represent the number foreclosure proceedings initiated, not actual sales due to foreclosures. |
