Denver says more below-market homes may have been sold to people who don’t qualify for them

This spring, the city said more than 300 below-market homes were possibly out of compliance — now it’s adding about 50 more to the list.

Denver City Attorney Kristin Bronson (left) and Britta Fisher, chief housing officer at Denver’s Office of Economic Development, speak to the press inside the Wellington Webb Building, Sept. 5, 2018. (Kevin J. Beaty/Denverite)

Denver City Attorney Kristin Bronson (left) and Britta Fisher, chief housing officer at Denver’s Office of Economic Development, speak to the press inside the Wellington Webb Building, Sept. 5, 2018. (Kevin J. Beaty/Denverite)

Donna Bryson. (Kevin J. Beaty/Denverite)

Nearly 50 more houses may be among those that slipped out of compliance with Denver’s affordable project.

The discovery was made recently during a review of homes that had been foreclosed, Denver’s Office of Economic Development spokesman Derek Woodbury said Wednesday.

In a press release, OED said it had determined that in most cases the covenant restrictions meant to preserve affordability are removed in foreclosures in which the bank or other entity that held the first mortgage acquires the property. The 49 properties now flagged were sold at foreclosure to buyers who were not the first mortgage holders and therefore should have remained in Denver’s Affordable Homeownership Program.

Woodbury said the city has just begun notifying those 49 owners.

About 1,400 homes are covered by the program under which they should be sold only to people earning below the area’s average median income and meet other requirements. OED announced seven months ago that 306 homes were possibly out of compliance because covenant restrictions may not have been adhered to when the original buyers sold them. Denver city officials have been working with real estate brokers and others to ensure the problem does not recur by finding ways to make such covenant restrictions harder to miss during home sales.

OED also said in its press release Wednesday that of those 306, 130 properties have now been brought back into compliance. Woodbury added in an email that in 82 of those 130 cases, owners were found to have incomes that qualified them for affordable housing  or they completed missing documentation. Of the others, 21 sold their property to income-qualified buyers, 18 had documentation issues that were corrected, four owners moved back into their homes as primary residences, and the others were resolved for various technical reasons.

Since the city revealed the problem earlier this year, there were concerns that people who didn’t qualify or hadn’t gone through the proper process would have to relinquish their homes, perhaps at a financial loss.

Woodbury said that while the city understood the stress this has caused for the homeowners involved, “it’s critical for the city to preserve each and every home that’s part of the affordability program.”

In the initial 306 cases, homeowners were told they could work with OED through Dec. 31, 2018 to clear any covenant violations. Woodbury said in an email Wednesday that in the 49 newly discovered cases, his office would work into 2019 with owners seeking resolution in good faith.

“We are striving to enter into a conversation with each owner to learn more about their situations in order to bring their homes into compliance,” Woodbury said.