Another Jump in California Foreclosure Activity

April 22, 2008

La Jolla, CA.--The number of California homes going into foreclosure jumped last quarter to its highest level in more than 15 years, as the market continued to works its way through declining home values and a pool of at-risk mortgages that were originated in 2005 and 2006, a real estate information service reported.

Lending institutions sent homeowners 113,676 default notices during the January-to-March period. That was up by 39.4 percent from 81,550 the previous quarter, and up 143.1 percent from 46,760 for first-quarter 2007, according to DataQuick Information Systems.

Last quarter's number of defaults was the highest in DataQuick's statistics, which go back to 1992.

"The main factor behind this foreclosure surge remains the decline in home values. Additionally, a lot of the 'loans-gone-wild' activity happened in late 2005 and 2006 and that's working its way through the system. The big 'if' right now is whether or not the economy is in recession. If it is, the foreclosure problem could spread beyond the current categories of dicey mortgages, and into mainstream home loans," said Marshall Prentice, DataQuick's president.

Most of the loans that went into default last quarter were originated between August 2005 and October 2006. The median age was 23 months, up from 16 months a year earlier.

On primary mortgages, California homeowners were a median five months behind on their payments when the lender started the default process. The borrowers owed a median $11,474 on a median $346,750 mortgage.

On home equity loans and lines of credit, homeowners were a median eight months behind on their payments. Borrowers owed a median $3,512 on a median $60,000 credit line. However the amount of the credit line that was actually in use cannot be determined from public records.

DataQuick, a subsidiary of Vancouver-based MacDonald Dettwiler and Associates, monitors real estate activity nationwide and provides information to consumers, educational institutions, public agencies, lending institutions, title companies and industry analysts. Notices of Default are recorded at county recorders offices and mark the first step of the formal foreclosure process.

Although 113,676 default notices were filed last quarter, they pertained to 110,392 homes. The difference is the result of some borrowers defaulting on multiple loans (e.g. a primary mortgage and a line of credit).

Last quarter's default numbers were a record in almost all of the state's 58 counties. The notable exception being Los Angeles County, which was particularly hard hit by the recession of the early 1990s. During last quarter, the county's 20,339 defaults represented 94.8 percent of its peak quarter back in Q1 of 1996, which saw 21,444 defaults.

On a loan-by-loan basis, mortgages were least likely to go into default in San Francisco, Marin, and San Mateo counties. The likelihood was highest in Merced, San Joaquin and Stanislaus counties.

Of the homeowners in default, an estimated 32 percent emerge from the foreclosure process by bringing their payments current, refinancing, or selling the home and paying off what they owe. A year ago it was about 52 percent. The increased portion of homes lost to foreclosure reflects the slow real estate market, as well as the number of homes bought during the height of the market with multiple-loan financing, which makes 'work-outs' difficult.

Multiple-loan financing peaked in Q4 of 2006 at 60.9 percent of all financed home purchases. Last quarter it was 15.9 percent.

Trustees Deeds recorded, or the actual loss of a home to foreclosure, totaled 47,171 during the first quarter. That's the highest since DataQuick began tracking Trustees Deeds in 1988. Last quarter's total rose 48.9 percent from 31,676 in the previous quarter, and jumped 327.6 percent from 11,032 in first quarter 2007. In the last real estate cycle, Trustees Deeds peaked at 15,418 in third-quarter 1996. The all-time low was 637 in the second quarter of 2005.

There are 7.9 million houses and condos in the state, DataQuick reported.

Foreclosure resales have emerged as a significant market factor, accounting for 33.1 percent of all California resale activity last quarter. A year ago it was 3.2 percent. Foreclosure resales vary significantly by area, from 5.1 percent in San Francisco County to 66.7 percent in San Joaquin County.

Notices of Default
houses and condos

County/Region           2007Q1      2008Q1      Yr/Yr%
                                                
Los Angeles               8,843      20,339      130.0%
Orange                    2,644        7,082      167.9%
San Diego                 3,931        8,975      128.3%
Riverside                 5,750      15,022      161.3%
San Bernardino            4,357      11,149      155.9%
Ventura                     965        2,176      125.5%
Imperial                    258          566      119.4%
SoCal                   26,748      65,309      144.2%
                                                         
San Francisco               216          420        94.4%
Alameda                   1,578        3,194      102.4%
Contra Costa              1,969        4,718      139.6%
Santa Clara               1,058        3,074      190.5%
San Mateo                   382          911      138.5%
Marin                       118          314      166.1%
Solano                      914        2,091      128.8%
Sonoma                      407        1,392      242.0%
Napa                         88          284      222.7%
Bay Area                  6,730      16,398      143.7%
                                                         
Santa Cruz                  171          447      161.4%
Santa Barbara               372          897      141.1%
San Luis Obispo             181          385      112.7%
Monterey                    458        1,468      220.5%
Coast                     1,182        3,197      170.5%
                                                         
Sacramento                3,234        6,898      113.3%
San Joaquin               1,721        4,657      170.6%
Placer                      518        1,031        99.0%
Kern                      1,297        3,211      147.6%
Fresno                    1,116        2,464      120.8%
Madera                      184          523      184.2%
Merced                      511        1,759      244.2%
Tulare                      436          947      117.2%
Yolo                        197          488      147.7%
El Dorado                   219          394        79.9%
Stanislaus                1,141        3,192      179.8%
Kings                        88          182      106.8%
San Benito                  107          272      154.2%
Yuba                        151          357      136.4%
Colusa                       20           81      305.0%
Sutter                      114          337      195.6%
Central Valley          11,054      26,793      142.4%
                                                         
Mountains*                  291          588      102.1%
                                                         
North Calif*                755        1,391        84.2%
                                                         
Statewide               46,760     113,676      143.1%

* includes additional counties

Source: DataQuick Information Systems

Media calls: Andrew LePage (916)456-7157 or John Karevoll (909)867-9534

Copyright 2008 DataQuick Information Systems. All rights reserved.