El Paso County saw a rise in foreclosure notices going out to homeowners this year driven at least in part by the Department of Veterans Affairs ending its pandemic-era moratorium on home repossessions in December.

Since then, the VA also ended a mortgage relief program May 1 but is now working to replace it. President Donald Trump signed a bill last week authorizing a new VA housing initiative. 

The new law to help veterans came as a relief to Patrick Noonan, who oversees Colorado Housing Connects, a hotline tasked with helping residents facing housing crisis. 

“It’s been really hard to help our veteran homeowners with a lot of that policy uncertainty,” he said. “It came as a huge relief when we saw some congressional action.”

El Paso County data shows that through June, 504 foreclosure notices have gone out, and if the pace continues about 1,000 will be filed by the end of the year, said Tina McAlister director of the Public Trustee’s Office, which is housed in the county Treasurer’s Office. That’s considerably more than the 613 foreclosures that were started last year.

McAlister said the VA calling an end to its COVID-era moratorium played a role in the rise.

With roughly the same number of residents, Denver County has seen 334 foreclosure notices go out to residents through June after 560 last year, its data shows.

Statewide, the Colorado Housing Connects hotline is also seeing an uptick in questions about foreclosures, answering about 340 calls about them between July 2024 and June and about 290 calls about them during the prior 12-month period, Noonan said. Questions from veterans would represent a small subset of those numbers, he said. 

While the rise in foreclosures in El Paso County is notable, industry experts said the number is still historically low and very few foreclosures are finalized. Only 19 homes in the county have completed the foreclosure process this year because the homeowners found other solutions, McAlister said.   

One of those solutions for veterans will come through the new VA Home Loan Program Reform Act that will allow the VA to purchase a portion of a loan in default, not to exceed 25% of the balance to prevent foreclosure. The portion of the loan owned by the VA will not accrue interest, according to the Congressional Budget Office. The office estimates over 10 years, the program will cost $125 million.

It replaces a program that ended in May that allowed the VA to purchase loans in default and manage them directly with a lower interest rate. 

VA Press Secretary Peter Kasperowicz said the old program was phased out because the agency “is not set up or intended to be a mortgage loan restructuring service.”

The program is currently serving 29,000 veterans, he said. When The Gazette asked when the new program will be available, he said the agency will implement the new program “fully and faithfully.”

The previous VA mortgage relief program called the Veterans Affairs Servicing Purchase program (VASP) , was generous because the VA took over the entire loan and granted a low interest rate, explained Lisa Zurcher, director of collections for Ent Credit Union. The program helped five of Ent’s members, she said. 

While details about the new program haven’t been released yet, Zurcher explained, if it functions like a Federal Housing Administration relief program, the agency will take over a portion of the loan and the money will be due at the end of the life of the loan or when the home is sold.

A strong housing market 

Despite the uptick in foreclosure notices locally Jenifer Waller, president and CEO of the Colorado Bankers Association, said the housing market is still healthy and many homeowners can sell their homes for more than they owe and walk away with a bit of money. That’s far better than during the Great Recession from late 2007 to mid 2009 when many people owed more than their home was worth. 

She also noted that loan delinquencies, a measure of homeowners falling behind on their payments is low at 3.2% across the country. Delinquencies can be an early indicator of financial trouble. 

Sterling Campbell, with Loan Depot, noted that there is still a shortage of homes on the market nationally and home values continue to rise. In June, El Paso County’s median home price hit a record $500,000.

When interest rates come back down, he expects to see more homebuying activity, as homeowners with low interest rates jump back into the market.

“I am very optimistic,” he said.

Hotline seeing uptick in need

Still, Noonan at Colorado Housing Connects hotline said he is hearing from more and more people who have been laid off from both the federal government and private companies. A sudden drop in income creates financial trouble for renters and homeowners alike. He noted that evictions in the 4th Judicial District, which encompasses El Paso and Teller counties, hit an all-time high last year. 

For homeowners, the timeline to correct their finances can be a little bit longer, but also tricky — particularly if the problem is higher home insurance rates or homeowners association fees, that are wrapped into monthly payments but not directly driven by the loan. 

For some retirees, options can include going back to work or shopping for cheaper insurance. If the problem is the loan, some lenders will renegotiate or provide more time. Homeowners can also sell their homes on their own to repay debt,  Noonan and several industry representatives said. 

In addition to traditional options, the state still has $12.2 million in its Homeowner Assistance Funds to help residents catch up on their mortgage payments. The COVID-era fund started with $175 million.

Noonan noted there is no blanket solution because for one person moving to a smaller house closer to family might make sense, while for another the current home might be the family’s anchor, Noonan said. But keeping families housed is ultimately a better outcome for everyone.   

“Our community is stronger when everyone can keep a roof over their head,” he said. 

Experts agreed the most important step for homeowners in trouble is calling the lender as soon as possible to talk through possible solutions, whether the lender is commercial or the VA, if the loan was backed by the agency. 

“I call it the old 20 seconds of courage,” said Greg Wolff, managing owner and broker at Wolff Real Estate Group, noting that the VA and lenders are typically eager to help. 

This story has been updated to correct Tina McAlister’s title.