A crew of nine movers swarms over a Lakewood townhome, quickly clearing out three floors and piling the contents in the alley.

Luke Beuthel, a field inspector with a property management company called Mercury Alliance, opens drawers in the kitchen one by one, snapping digital photos to show they are empty.

Nearby, locksmith Bill Grasmick hurries to replace a deadbolt on the front door.

In under an hour, the house is emptied and physical control gained by Wells Fargo, holder of the delinquent mortgage.

"There is no packing involved," says mover Art Fields, owner of Pueblo-based Creative Homes LLC. "This is one-way: easy and quick."

Meanwhile, the couple who had been living in the house glumly load their 3-year-old son and some belongings into a blue hatchback. They say they'll spend the night in a hotel, then regroup and plan their next move.

For most of 2006, Colorado has had the highest foreclosure rate in the country - a grim tally of mortgage defaults behind which lie thousands of stories of personal heartache. But money can be made even from misery, and this year, profits from foreclosures have soared.

There are lawyers who initiate foreclosures, property managers who oversee troubled homes, service providers who maintain them and listing agents and auctioneers who sell them.

There are also investors who buy and flip the foreclosed properties and Realtors who specialize in "short sales," or selling a home before it is lost in foreclosure.

This Lakewood eviction generates about $1,000 for Field's moving crew and the locksmith. The property management firm, Mercury Alliance, won't get paid until it sells the house, but then it will reap 2.2 percent of the home's resale price, roughly $3,600.

Others will take bites of the foreclosure profits as well. About 1 percent, or $1,650, will go to Premiere Asset Services, Wells Fargo's property management arm. The Realtor who provides a buyer will get about 2.8 percent, or $4,620.

Mortgage Problems?

Watching over the vacancies

Tom Di Mercurio, owner of Denver- based Mercury Alliance, makes no apologies for his line of work.

"There is an entire cottage industry around the foreclosure business," said Di Mercurio, who has managed thousands of lender-owned properties in a 35-year career. Mercury Alliance's business is up 150 percent this year, he said.

The work is time-consuming and the margins slimmer than conventional real estate sales. Watching over empty homes for months isn't easy work.

Di Mercurio said he has seen it all: Homes abandoned with unfinished meals on the table; a home swept clean and the key and an apology note placed neatly on the table; most frequently, homes left in utter disrepair.

Some angry former owners have stripped properties of appliances, cabinets, even light fixtures. More vindictive owners have been known to plug drains with concrete and turn on the water. Vandals and vagrants will target abandoned homes.

But with more than 18,000 foreclosures expected this year - a record for the metro area - servicing foreclosures is where the action is in real estate these days.

The sooner foreclosed homes are resold and occupied by people who will care for them, the better for nearby home owners and for the metro area's ailing real estate market, Di Mercurio said.

An unheralded growth industry

Properties that lenders acquire through foreclosure are known as REO, short for real-estate owned.

Metro Denver has the largest concentration of third-party REO property managers of any city, a legacy of a real estate downturn - and a wave of foreclosures - that accompanied the oil bust of the late 1980s.

The current foreclosure epidemic traces more to overbuilding and aggressive lending than to fundamental economic problems, but the industry spawned by the earlier deluge of defaults is coming on strong.

Don't expect economic development officials to promote the fact, but REO property management is one of metro Denver's hottest growth industries.

"We are hiring like crazy. We expect to get busier in 2007," said David McCarthy, president and chief executive of Integrated Asset Services, one of the country's largest independent REO property managers.

The firm of 116 workers has hired 42 people this year and plans to add another 30 in the first quarter of 2007. The number of foreclosed homes it has sold has jumped from about 3,000 last year to 4,000 this year.

Head counts are up about 25 percent at Fidelity National Asset Management Solutions, another big REO property management firm. It employs 125 people nationally, including 100 in Westminster, president Chad Neel said.

Fidelity Solutions sells about 1,000 foreclosed properties a month, a pace about 40 percent ahead of last year, he said.

"I am turning away business," Neel said. "Every client we have says there is a tsunami coming."

Business for law firms

Long before a foreclosure turns into a lockout, there are dozens of pages of legal documents that must be filed, costing lenders hundreds of dollars.

One law firm - Castle Meinhold & Stawiarski - dominates the foreclosure business in Colorado. It is a combination of three smaller firms with foreclosure practices that merged in 2003 to improve margins by increasing volume, said partner Don Meinhold. Lawyers Lawrence Castle, Caren Castle and Leo Stawiarski are the other name partners.

"It is a fairly low-margin business. The reason we do it is because we can do the volume," Meinhold said.

Castle Meinhold and its predecessor firms represented lenders in 23,600 of 37,700 foreclosures, or 62.2 percent, in Adams, Arapahoe, Denver and Weld counties from 2003 to 2006, a Denver Post analysis of public records found. Castle Meinhold charges lenders up to $800 a foreclosure, so its revenues in those four counties during the period were as much as $18.4 million. Meinhold said the firm does not collect the full $800 in every case, but he could not provide specifics.

The $800 fee is set as a maximum by the government-sponsored lending giants Freddie Mac and Fannie Mae, as well as by the U.S. Departments of Housing and Urban Development and Veterans Affairs, Meinhold said.

"There isn't any wiggle room there. We have to stick to those levels," he said. "We could have 100 percent of the market and we couldn't raise the fees."

Castle Meinhold also typically charges up to $400 for title work on foreclosures, according to Arapahoe County trustee records. The firm's own title company, Colorado American Title, handles the majority of its title work, Meinhold said.

Castle Meinhold and its predecessor firms faced lawsuits starting in the late 1990s and continuing through last year, claiming that it overcharged for title work. Its title fees sometimes exceeded $1,000 at that time. Foreclosed homeowners claimed the firms used their dominance of the foreclosure market to charge excessive title fees.

Castle Meinhold denied that it charged excessive fees. The cases were settled or dismissed. Boulder attorney Andrew Rosen, who filed suits against Castle Meinhold, said the firm is now charging lower fees for title work.

Filling newspapers with notices

Once a foreclosure notice is filed with the public trustee, the public must be notified, typically with a listing in a community newspaper.

Foreclosure notices have proved to be a bright spot in an otherwise tough print advertising market, said Scott Perriman, publisher of MetroNorth Newspapers.

"They have become a large revenue source for us," Perriman said. "We prefer that the numbers weren't going up, because it signals that our economy is not what it should be."

Five years ago, the Northglenn- Thornton Sentinel and Westminster Window ran about eight pages of foreclosure notices a week. Now the community newspapers consistently run 20 to 24 pages.

Although Perriman won't discuss specific revenue figures, it costs $275 to run a foreclosure notice for five weeks. And in Adams County alone, more than 4,000 foreclosure notices are expected to be filed this year.

Publishing the notices has required more pages, creating more room for news articles. But the notices themselves are among the most popular content, Perriman said.

"It is important to know if your next- door neighbor is in foreclosure," he said.

Perriman, who tunes in to late-night television when he can't sleep, cites another reason why notices are a must- read for so many: seminars that promise a fortune by investing in foreclosed properties.

"Flippers" find hurdles

Who wouldn't want to make $70,000 for 30 hours of work?

Real estate investor Karl Noons posed that question to about 75 people attending a recent seminar in Lakewood called "Discovering Foreclosure Profits."

"There's so much money out there it's crazy, and there are people making it in your neighborhood. So why not you?" Noons said. "Once you get our system down, it's like printing money."

Noons' "system" includes buying foreclosed or other distressed properties at a discount with private investors' money and selling for a profit. For $3,000, he and others from the Florida-based National Foreclosure Institute will reveal their secrets.

"This is the place to be if you're serious about making money," he said.

Has Colorado's foreclosure epidemic created opportunities for property investors to make millions?

Experienced property "flippers" say there is money to be made, but don't quit your day job.

Discounted foreclosed properties are available, but a weak real estate market makes it difficult to sell at a profit.

"It's not as easy as some people think," said Nathan Christiansen, who has flipped five foreclosed homes for a profit of about $60,000. "But if you can find the bargains, you can make money."

Christiansen had no real estate experience in 2004 when he flipped his first property. It was a three-bedroom townhouse in his Brighton neighborhood that had been repossessed by HUD.

Through a Realtor friend, Christiansen had a buyer lined up before he bid on the property. He paid $130,000 and sold the property three weeks later for $165,000, returning $10,000 to the buyer for closing costs and down payment assistance. After costs and broker commissions, he made $14,000 on the flip.

"The Realtor told me I got lucky on that one and that it usually takes more work and more time," Christiansen said. "He was right."

Later that year, Christiansen bought a HUD-foreclosed house in Commerce City for $115,000.

It took nearly a year to sell, and repairs cost more than he expected. He sold it for $158,000, but he still lost $5,000.

On three subsequent transactions, he netted $10,000 to $15,000. The money supplements his income from his government consulting business, Christiansen said.

Christiansen now lives in the Phoenix area with his wife and son. But he still invests in Denver-area properties. Wednesday, he bought two more.

"There are so many HUD homes available in Colorado," he said. "You can find 50 to 60 properties available at any one time in Denver alone."

At the foreclosure seminar in Lakewood, few in attendance signed up for the $3,000 workshop. Many in the crowd were real estate pros who attended the free seminar out of curiosity and in hopes of learning new tricks.

"It takes work," said Lakewood broker and real estate investor Cletus Thill. "Nothing falls into your hands too easily."

"Short sales" commissions

As he roams through Aurora's neighborhoods, Keller Williams real estate agent Steve Shoemaker sees himself as a white knight of sorts.

If he can get to delinquent borrowers in time, Shoemaker is confident he can help many of them avoid foreclosure and eviction.

"We like to be the first one who knocks on the door," he said.

Shoemaker must convince the owner, often through repeated visits, that he is more trustworthy than the dozen other people who will be offering help.

For every 40 doors he knocks on, Shoemaker might get one call back. Half the time he advises people for free, helping them work out agreements with their lenders short of a sale, he said; their gratitude often leads to referrals for him.

When he can't work out a deal to placate a homeowner's lender, he tries for a "short sale" - getting the lender to accept a sales price below what is owed. For this he earns a commission of 2 percent to 3 percent of the sales price.

While that was a tough task two years ago, more lenders are now willing to take less than what is owed on a mortgage.

A typical foreclosure can cost a lender $30,000 to $50,000 and ruin a borrower's credit rating, Shoemaker said. A short sale can offer a compromise out of a difficult situation.

Shoemaker stops at a home on Ensenada Street in Aurora's Fox Hill neighborhood and knocks. When no one answers, he writes a quick note on his flier: "Deborah, call Steve, I can help you."

He carefully folds the flier, slips in his business card and inserts it in the door jamb so that other foreclosure consultants won't see it and remove it.

This year, Shoemaker has helped clients close on 16 properties before they were lost to foreclosure. A dozen more were lost before he could sell them, he said.

He thinks 2007 will be an extremely busy year.

More and more real estate agents, faced with a sluggish resale market, are wanting to work with distressed properties, said Shoemaker, who is expanding his team.

Shoemaker, in turn, longs for the day when he can focus on selling higher- end homes not facing foreclosure.

A busy auction block

When REO property managers can't sell a home, they call on auctioneers like Dallas-based Hudson & Marshall.

Since 1999, the firm has focused exclusively on foreclosed properties, selling more than 40,000 homes, said co- owner David Webb.

His firm was in Denver just before Thanksgiving, auctioning 90 homes in a ballroom sale. Webb plans to be back in late February with another batch of homes.

Lenders are willing to discount the homes in return for a quick sale that reduces their carrying costs and mitigates the damage that comes when a home sits vacant for too many months, Webb said.

Auction firms can make money in different ways, sometimes off a flat fee but more typically by sharing the listing agent's commission.

As more foreclosures flood the market and the inventory of unsold homes rises, auctions will increasingly become an important way to match buyers and sellers.

"They are telling us Colorado is very heavily hit and we will be active here for the next year and a half," Webb said.

Staff writer Aldo Svaldi can be reached at 303-954-1410 or This e-mail address is being protected from spam bots, you need JavaScript enabled to view it .