Another Increase in California Foreclosure Activity

July 22, 2008

La Jolla, CA.--Lenders started foreclosure proceedings on a record number of California homeowners last quarter, the result of declining home values and the rampant spoilage of a batch of especially risky home loans made in late 2005 and 2006, a real estate information service reported.

Mortgage servicers recorded 121,341 "notices of default" during the April-through-June period. That was up 6.6 percent from a revised 113,809 for this year's first quarter, and up 124.9 percent from 53,943 in second-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.

"It's still very clear that most of the problems are in certain areas and in certain categories. Basically, areas that absorbed spillover activity during the end of the boom cycle in 2006 seem to be the hardest hit. Prices went too high, fueled by the availability of easy-to-get dicey home loans. An added element was speculative buying," said John Walsh, DataQuick president.

"The small increase in defaults from the first to the second quarter may indicate that we're nearing a plateau. We won't know until the end of the year, but it may be that some lenders are starting to prioritize workouts with homeowners instead of grinding things through the foreclosure process. Of course, they may just be swamped and can't handle processing any more paperwork," he said.

Most of the loans that went into default last quarter were originated between September 2005 and November 2006. The median age was 26 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 filed the notice of default. The borrowers owed a median $11,583 on a median $346,400 mortgage.

On home equity loans and lines of credit, homeowners were a median eight months behind on their payments. Borrowers owed a median $3,492 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 121,341 default notices were filed last quarter, they involved 118,020 homes because some borrowers were in default 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. That included Los Angeles County, where last quarter's 21,632 residential defaults surpassed the prior record of 21,444 recorded during first-quarter 1996.

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

Of the homeowners in default, an estimated 22 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 11.5 percent.

Trustees Deeds recorded, or the actual loss of a home to foreclosure, totaled 63,061 during the second quarter. That's the highest since DataQuick began tracking Trustees Deeds in 1988. Last quarter's total rose 33.5 percent from 47,221 in the previous quarter, and jumped 261.0 percent from 17,458 in second 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 8.4 million houses and condos in the state, DataQuick reported.

Foreclosure resales have emerged as a significant market factor, accounting for 40.0 percent of all California resale activity last quarter. A year ago it was 5.4 percent. Foreclosure resales vary significantly by area, from 3.0 percent in San Francisco County to 75.1 percent in Merced County.

Notices of Default
houses and condos

County/Region           2007Q2      2008Q2      Yr/Yr%
                                                
Los Angeles             10,393      21,632      108.1%
Orange                   2,984       7,348      146.2%
San Diego                4,383       9,519      117.2%
Riverside                6,648      14,974      125.2%
San Bernardino           5,141      11,817      129.9%
Ventura                  1,059       2,303      117.5%
Imperial                   220         635      188.6%
Socal                   30,828      68,228      121.3%
                                                         
San Francisco              257         418       62.6%
Alameda                  1,612       3,812      136.5%
Contra Costa             2,316       5,046      117.9%
Santa Clara              1,275       3,751      194.2%
San Mateo                  463       1,066      130.2%
Marin                      118         284      140.7%
Solano                   1,065       2,427      127.9%
Sonoma                     462       1,376      197.8%
Napa                       128         336      162.5%
Bay Area                 7,696      18,516      140.6%
                                                         
Santa Cruz                 155         531      242.6%
Santa Barbara              434         922      112.4%
San Luis Obispo            208         499      139.9%
Monterey                   483       1,688      249.5%
Coast                    1,280       3,640      184.4%
                                                         
Sacramento               3,840       7,325       90.8%
San Joaquin              1,983       4,795      141.8%
Placer                     627       1,122       78.9%
Kern                     1,593       3,459      117.1%
Fresno                   1,380       2,821      104.4%
Madera                     215         555      158.1%
Merced                     642       1,936      201.6%
Tulare                     428       1,099      156.8%
Yolo                       232         548      136.2%
El Dorado                  222         442       99.1%
Stanislaus               1,286       3,464      169.4%
Kings                       75         188      150.7%
San Benito                 122         290      137.7%
Yuba                       171         373      118.1%
Colusa                      39          92      135.9%
Sutter                     109         374      243.1%
Central Valley          12,964      28,883      122.8%
                                                         
Mountains*                 328         662      101.8%
                                                         
North Calif*               847       1,412       66.7%
                                                         
Statewide*              53,943     121,341      124.9%

* includes additional counties

Trustees Deeds Recorded
houses and condos

County/Region           2007Q2      2008Q2      Yr/Yr%
       
Los Angeles 2,581 9,609 272.3%
Orange 821 3,085 275.8%
San Diego 1,714 4,807 180.5%
Riverside 2,517 8,814 250.2%
San Bernardino 1,505 6,251 315.3%
Ventura 316 1,123 255.4%
Imperial 74 305 312.2%
Socal 9,528 33,994 256.8%
       
San Francisco 50 141 182.0%
Alameda 497 1,709 243.9%
Contra Costa 777 2,965 281.6%
Santa Clara 255 1,560 511.8%
San Mateo 97 347 257.7%
Marin 25 128 412.0%
Solano 324 1,406 334.0%
Sonoma 163 788 383.4%
Napa 34 162 376.5%
Bay Area 2,222 9,206 314.3%
       
Santa Cruz 46 232 404.3%
Santa Barbara 137 443 223.4%
San Luis Obispo 55 177 221.8%
Monterey 156 847 442.9%
Coast 394 1,699 331.2%
       
Sacramento 1,662 4,475 169.3%
San Joaquin 792 3,185 302.1%
Placer 220 572 160.0%
Kern 533 2,048 284.2%
Fresno 402 1,412 251.2%
Madera 55 311 465.5%
Merced 243 1,223 403.3%
Tulare 142 519 265.5%
Yolo 103 293 184.5%
El Dorado 89 196 120.2%
Stanislaus 522 2,207 322.8%
Kings 27 65 140.7%
San Benito 38 166 336.8%
Yuba 84 224 166.7%
Colusa 9 58 544.4%
Sutter 57 202 254.4%
Central Valley 4,978 17,156 244.6%
       
Mountains* 90 300 233.3%
       
North Calif* 246 676 174.8%
       
Statewide 17,458 63,031 261.0%

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.

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