California foreclosure "surge": Up 327% from '07 levels

The number of California homes lost to foreclosure in the first quarter surged 327% from year-ago levels -- reaching an average of more than 500 foreclosures per day -- DataQuick said in a report, warning that the widening foreclosure problem could "spread beyond the current categories of dicey mortgages, and into mainstream home loans."

From DataQuick's report on California foreclosures in the first three months of 2008: "Trustees Deeds recorded, or the actual loss of a home to foreclosure, totaled 47,171 during the first quarter. ...  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."  That translates into 517 foreclosures every day in the first quarter of 2008.

DataQuick president Marshall Prentice: "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."

From The L.A. Times' Peter Hong: "Sinking home values and the collapse of flimsy mortgages sent a record number of California homes into the foreclosure process in the first three months of this year, a real estate information service reported today."

Default notices -- which mark the beginning of the foreclosure process -- increased sharply, but not as rapidly as outright foreclosures. From Bloomberg News: "California mortgage defaults more than doubled in the first quarter to the highest in 15 years as a drop in sales and prices prevented some homeowners from selling their properties to pay debt, DataQuick Information Systems said.

More: "Homeowners received 113,676 default notices in the first quarter, up 143 percent from a year ago, La Jolla, California- based DataQuick said today in a statement. The level was the highest since at least 1992, when DataQuick's statistics begin."

Despite well publicized federal efforts to reach out to homeowners in default, the odds that they will ultimately lose their homes appear to be increasing. DataQuick reports that, 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.:

Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com
Photo Credit: Getty Images

Comments

[Calc]

We've seen the trend for some time.. increasing default notice combined with less likely possibility that someone in default gets out of it. I can't imagine what things would look like in a year if defaults and foreclosures increase from here.

The good news is that these REO homes are helping the housing market rationalize much quicker than it would normally. But I think we will start seeing the add in reports from DQ saying how many home owners sold their homes for a loss which was a regular feature to the reports in the mid-90's.

Houses are illiquid investments, equity doesn't mean much unless you can tap it. With home loans tightening and sales slowing it is becoming harder to do so just when the economy is slowing.

[Jules]

He He~Bring it ON. We all might not be home debtors after all , and pay a REASONABLE mortgage. It will be interesting to see how much the real estate will have changed one year from now. I just had a realtard leave a message regarding looking for homes. She said I should hurry up and get pre-approved "IF" housing should come down. I fired her a$$! Question though: We rent~will buy when we can afford it~should we get pre-approved now, even though it could be a year from now? Thanks all...LOVE THIS BLOG!

[caliguy2699]

This report makes a good point - many of the loans now exploding were made in 2005-2006 and were 80/20s where the borrower put 0 down, or others where the borrower put virtually $0 down.

It is very scary then that these kinds of loans - virtually by themselves - have been responsible for the worst foreclosure numbers in 15+ years. What happens if people with sensible loans who made downpayments start defaulting?

[dfafdaf]

LOL, big surprise. This is what happens when people with ordinary incomes by 600k houses. The banks and the borrowers should be disgusted with themselves for agreeing to a transaction like this that could never possibly work.

Me and my spouse together make 80k, let's buy a 600k house.

Good lord.

[Rick]

People going through foreclosure don't deserve any kind of sympathy. They should've read the fine print.

Nothing is more hilarious than hearing about a family who has an SUV with 24" inch rims on the driveway and yet cannot pay their mortgage. Let 'em fry.

[Cal]

DQ story is up:
http://dqnews.com/News/California/CA-
Foreclosures/RRFor080422.aspx

It will be interesting to see the trustee sales breakout for the Southland, LA Times usually posts that with the midnight version of the story. I have a hole in my data regarding last years Q1 trustee sales so hopefully they have the YoY data too.

47k homes lost to trustee sales versus 64k homes sold on the open market.

It is clear the banks are getting out while the getting is good (it isn't like it is going to get better anytime soon). If you think about those numbers and then think about the number of short sales... it is the very educated or very lucky homeowner that gets out now.

[Fred]

500+ foreclosures per day in California alone? That is an unreal number.

[TJ]

Serves the "flippers" right...I say, let their credit records go all to hell. Greed does terrible things.

[JBJM]

It would be fascinating to learn how many of these foreclosures were to illegal immigrants.

[JBJM]

It would be fascinating to learn how many of these foreclosures were to illegal immigrants.

[RIP]

Too many people living beyond their means to impress the guy next door who is going under also. Just dumb. Let them sink and deny them AMY form of credit period.

[Barbara Tiemeier]

I don't know of ANY foreclosed homes in this little Texas town. Homes here are $200K to $1.3million. We didn't ever get into those exotic loans.

[dave]

This is very misleading. FORECLOSURES UP 327 PERCENT.

What is failed to be related in this article is the fact that there are TWENTY MILLION active mortgages in california. Lets say the number of foreclosures LEAPS INTO THE STRATOSPHERE, say, to SIXTY THOUSAND foreclosures from its current level (47k). Well, that may sound REAL impressive and doom and gloom lovers can rejoice, but that is only THREE TENTHS OF ONE PERCENT of the total number of active mortgages. 99.7% of mortgages are intact, a dreadful, horrible, amazing MEASLY three tenths of one percent are in foreclosure!

Let's face it, we do have a problem in the housing market, but it is WAY WAY WAY WAY overblown by ridiculous, and misleading headlines such as this.

[Bob Graham Las Vegas]

If I hear "CYCLICAL" as the culprit one more time , I also want to hear Harley Davidson metioned as this would be the grand daddy of all real estate cycles . What this represents is a downturn in what people have as real income and an adjustment needs to be made in something other than more visas which would allow more low wages and bring more illegal immigrants into the fray . This is the beast , the lenders have just ridden the beast into the dirt .

[qzaki]

i published a mortgage walk-away calculator and it quickly became one of the top downloads on my site. i wonder how many of the "foreclosures" are really just people who decide to stop paying their mortgages and save up for a security deposit on a decent rental.

you too? here's the link (Excel format):
http://www.qzaki.com/Archive/BITS-LAcondoII.xls

[tom]

No wonder my landlord wants me out; rents are starting to skyrocket!

[chinaski]

It hasn't even started yet. Here in the South Bay people who can't sell are renting, so the rental market is getting saturated, driving the prices down. So why would I pay $4,000 month to own a house in the Inland Empire and choke in 110 degree heat in the summer when I can pay $2500 a month to live three blocks from the beach? Plus the people here are so used to bidding wars for their houses that they take it personal when they get an offer that is 50K less than their asking price. Sellers here refuse to believe that this mortgage mess will affect the price of housing here when in reality, Southern California is likely to become the epicenter.

[JPG]

On a side note, the New York Times has an article today by Roger Lowenstein that will be in Sunday's magazine about Moody's and how and why it rated mortgage backed securities so highly. It's an enlightening look (in hindsight of course) at the stupidity of supposedly intelligent people.

http://www.nytimes.com/2008/04/27/
magazine/27Credit-t.html?pagewanted=1

[Red Fred]

It is great that you are publishing all fo these spectacular numbers, but as a responsible communication medium, why don't you publish the actual foreclosure rate against the total number of mortgages? NAtionwide, the foreclosure rate is about 2%. If you add in the mortgages that are on the verge of foreclosure, it goes to 5%. What does this mean? IT MEANS THAT 95% OF THE PEOPLE WITH MORTGAGES ARE PAYING WITHIN TERMS!!!!!!!! Based on your spectacular reporting I would expect to see tent cities- modern day "Hoovervilles" popping up all over LA. iT IS NOT GOING TO HAPPEN!!!!!

[Tim]

Jules --you should wait to get "pre-approved" as the qualifications more-than-likely will change by next year. So, what you qualify for now may not be the same next year. And why did your "realtard' forget to explain this to you --perhaps she/he could not get away from you quick enough!!

Realtor

[RIP]

Too many people liveing above their means to impress the guy next door who is sinking also. If they are that foolish and vain let them fall.

[USAALLTHEWAY]

Oh, well. I guess people shouldn't buy houses they can't afford. What did they think was going to happen??!!

[Vince]

Is there some reason why we have to see these type of articles every single day? Have news people run out of things to report? Every month we get dozens and dozens of stories telling us last month home sales are down from last year. Yeah, we know the market is down and people made bad decisions. Do we need to be bombarded with it on a daily basis? No.

[argex]

Well, since there is no recourse for loans used to purchase a house in California (other than taking the house), foreclosure is a very tempting proposition when you have a $4000/month mortgage and you owe $200K more than your house is currently worth.

People are literally walking away. And it really doesn't hurt your credit any more than if you didn't pay a credit card and settled on it.

Perhaps house prices will drop to the point to where responsible working families can afford a home after they have saved a reasonable down payment. I think we have a long way to go before we find bottom in California home prices.

[Potsmoke]

Must be all those "flippers", "God made me do it", New Age, get rich quick, crack head, idiots. Guess what? Y'all screwed up big time. Tough.

[Eric]

God help this country.

[John]

Wow, who could have seen that coming?

Oh, wait, all of us "bitter" renters.

[Anonymous]

Newton said it best, "What goes up, must come down".

Ultimately, it all about what you can afford. With conforming jumbos maxing out at $700k and a couple of hundred grand down, seems like the most expensive houses will settle at a million soon. Mid range houses will be in the $250 to $600k range, just like they were before all this nonsense started.

The fantasy that any house will sell at $2 million plus is quickly coming to an end unless it's something truly special.

By the way, IndyMac stock is now under $4/share, 1/10th of where it was a year ago. Countrywide is down to 5, down from the mid forties a year ago. At least the perpetrators of all this nonsense are getting hammered a little.

[Franc]

Just another reason why Americans are fleeing Mexifornia. What an overpriced dump. I guess the state is learning the middle class residents cannot afford lavish public employee pensions, workmen comp scams, endless benefits for illegal aliens, $4.50 a gallon gas thanks to Henry Waxman, Feinstein, Boxer, Pelosi, et al.

[mark g]

The short sale/foreclosure/reo properties out there when they are finally sold, haven't they already been written off as a loss? Is this just extra cash when resold again? It seems to me that the insitutions won't be able to sit on all of these properties over the next couple of years, so they may have to dump them to first qualified bidder in order to keep inventory from swelling... high octane price discovery?!

[Evelyn]

Angelo Mozillo thanks all of you who have made a contribution to his retirement fund!

[Fred]

Jules (#2), no you shouldn't get pre-approved nowl. All that will do is put a dent in your credit score, and whatever amount you get pre-approved for will only be good for a month. Get pre-approved a month out from when you plan to buy.

[StacyH]

Like in Florida, how many of these were second home properties?

And the article didn't state these were 80 / 20 loans. It said "loans gone wild." In quotes no less. Which the reason all these people are defaulting is the payments went up to a point they couldn't pay. ARMs. Maybe 80 / 20 ARMS but ARMS no less. People get 80/20 traditionals to avoid PMI.

Or - they are upside down and rather than put one more payment towards it, they're going to default, let the bank sell it, and start over.

It really just doesn't make sense to me. Even if you're upside down today, there is no telling what the market will do after this all shakes out. In ten years the value could be up again.

I almost feel like they saw a news report that said people were just walking away from these loans they didn't like so people decided "hey, we could do that too."

LIVE WITHIN YOUR MEANS. If you don't like your means, get an education, get a skill, get an idea, get a better job.

[Lord Voldemort]

Yup! I live in the Bay Area and used to be the one at the cocktail parties who would dare to say, "no...I'm not going to buy. I don't have a down (at least 10%) and I don't think anybody should be buying otherwise. All this is is one debt-fueled boom in sunken capital, not 'true wealth. And someday it will all blow up in your faces.'"

Of course, I was shouting profanities at the Choir by saying that. Especially the heresy in the last two sentences.

Then there was my parents who kept thinking that I couldn't make financial decisions for myself because I 'defied conventional wisdom' about buying a house.

So, I am pushing 40 and always rented. But at least I'm not in negative equity land. But of course, I'll end up paying for it just like the rest of you. That is what 'bailouts' are all about -- Robbing Peter to pay Paul for his f--k-ups.

And, already rents are starting to go up because of the inflation and all those 'former owners' going back to renting again.

Hmmm...after its all said and the bailouts are done, perhaps I was the irrational one for not jumping on the moral hazard bandwagon after all. What a way to run a society!

[Tim]

Awesome, screw them. I have been saving for a house for over 5 years now, let the idiots who bought too much house for the money get foreclosed. Prices are going down which makes it good for people who actually saved for a down payment.

[greg]

90% of people losing their homes are IDIOTS..No one else has the guts to say it, but it is true..Yes 10% came upon hard times due to family illness injury, etc, but beyond that the others were IDIOTS for not lLIVING WITHIN A REASONABLE budget.. I don't remember anything in the constitution about the RIGHT to own a home..IF YOU CAN' AFFORD A HOUSE DON'T BUY ONE. and sure as hell don't pull all your equity and then whine like babies because your upside down. I bet there are a lot more people out there like me who work hard and bought a very small house since that FIT MY BUDGET, but no reporter wants to talk to us. they want to speak to the IDIOT who dropped out of high school to smoke dope and as an adult bought a $400,000 house on his Mcdonalds paycheck.

[Juan Valdez]

For all of the folks that still own the houses they owned prior to prop 13 all this is doing is blowing their windfall away. It is also opening the Kalifornia housing market so that it will be affordable to live there again.

[Keryl]

Why would massive defaults in the subprime markets lead to defaults in the prime markets. The main difference between a prime loan and a subprime loan is that the people who made the prime loan were sure the borrowers would be able to repay. Why would a bunch of people who got loans they couldn't repay effect that? I'm not seeing the logic here.

[MHR]

Anyone else remember how Congress pressured the mortgage companies to provide loans for people who were "missing out" on the joys of home ownership? Seems like it was the late-80's and early 90's. Our trusted instruments of government created this monster...and we're trusting them to straighten it out?

By the way, I got a 0-down mortgage - but I had enough sense not to bite on an ARM. I read the fine print, and chose a house we could afford.

[MyLessThanPrimeBeef]

DataQuick said in a report warning that the widening foreclosure problem could "spread beyond the current categories of dicey mortgages, and into mainstream home loans."

--------

There is nothing mainstream about 'mainstream' home loans...see, their appraised values are all part of that continuum of homes beginning from the subprime gutter all the way to the outrageously expensive castle in the sky. When you take away the bottom, the middle part, or what you think is the mainstream, is really not mainstream. You realize it has been distorted and radicalized, that there has been extreminalization (my new word), or mutation of valuation on the same old boxes that regular, non-mutated people used to live in

//////////

DataQuick president Marshall Prentice: "The main factor behind this foreclosure surge remains the decline in home values.

-------------------.

If you don't treat your house as a perpetual motion machine and have a mortgage you can actually afford without having to re-finance to escape financial doom every few months, why would you care about your home value? The real cause is the wide-spread and indiscrminate use of assisted-financial-suicide mortgages by people who worship Ponzi as their God. To blame declining home values is like pointing to the climbing Sumo wrestler when the Leaning Tower of Pizza falls and say, it's all the fat guy's fault.

[Jack]

How do normally intelligent people go brain dead? Talk about violating basic laws of business and common sense. Where was our $3 trillion government when this was happening? Oh I forgot, Greennspan and the pols were busy strongarming greedy lenders and borrowers into making bad loans so everyone could have "the American Dream". Nice job.

[LeftLA]

The Drudgies are here -- let the hatin' begin.

[RR]

Flippers only account for 10% of todays repos.
Many people have had to relocate to different states can't sell and can't carry 2 households. I am not an illegal alien , a flipper , nor do i have 22" rims...Racist.
I do not have a Repo,i think we should BLAME the originators of these loans.
THAT"S COMMON SENCE PEOPLE!
Ya'll have a good day now ya hear!
Lifes good in Texas!

[jj]

How many illegals who were buying homes and deported?

[Evil Banker]

Bwahahaha... we evil bankers owned your homes before you bought those corrupt mortgage products, and we'll own your homes after you default on them. You were just paying rent to a third-party mortgage lender all this time... and to think you told all your friends you "own your home." Back to the lower classes for you!!

[Echo]

What's the saying? As California goes, so goes the nation.

[John]

If a gun shop is liable for selling a gun to a registered criminal,
and bar owner is liable for selling liquor to someone who is obviously drunk,
then a mortgage lender is liable for selling a loan to someone who can't afford to pay it back.

It takes two parties to create this situation - both are guilty. Let them eat cake!

[Brian Caughlin]

Personal Responsibility Anyone? In Cali, I don't think so. I believe you get what you deserve, and if you bought into an ARM, and did not do the math, well........time to downsize! Some of us chose to get fixed rates, even though they were a little bit more expensive. We have paid a higher rate, because we did the math. Why should I now have to assist those who took calculated risks that did not turn out favorably? I don't get the whole idea of bailouts!!

[Bob]

I would like to see the statistics of the types of mortgages that are foreclosing. Also would like to see who was the initiating bank/broker.
My hunch is these "exotic" mortgages are at fault, meaning the loans did not really fir the borrowers current circumstances.

My answer to this issue is "tough". The banks/brokers
are losing their businesses/jobs due to bad decisions, the borrowers are losing their homes due to bad decisions, and the stockholders are losing their value in their stock due to bad decisions. Everyone involved ispaying the price........

The government needs to stay out of this fix....as a fix like this only benefits the ones who made bad decisions!
This becomes a source of homeowner welfare....and it is not right!

[RZ]

Are sinking home values the main culprit behind foreclosures, or the fact that many home buyers bit off more than they could chew? I think it's the latter.

[Southern State Twist]

The over priced homes and economy of California today has caused a big part of our nations slow down. Heck, I have seen pictures of a simple ranch house in California for over a million dollars and I can buy the same thing for $150,000 or less in TN, SC, VA, NC and other southern states. I don't feel much sorrow for California folks, because the people's tolerance level of overpriced everything is ridiculous. Please, stay there we don't want those intolerant folks living in the Southern states. That would cause us more inflation and expenses. And by the way were aren't a bunch of "red necks" but at least we have more common sense than our Western neighbors.

[Joel]

Question for California residents with knowledge of your R.E. industry from a family in AZ hoping to own in San Diego area someday...

My wife and kids vacation in San Diego, La Jolla, Mission Beach, Solana Beach, etc and have always dreamed of owning a vacation home in the area. 3 bedroom, low maintenance, near beaches/shopping/activities/entertainment. I have been to S. Cali a few times this past year, and been told by every realtor NOW is the time to buy. A place I looked at in July 07 for $375,000, which had sold a year earlier for $475,000, was just listed by a bank REO for $280,000. My question to all of you on this blog...is NOW the time to buy, or do we continue to wait?

Thanks. Also, I'd appriciate any suggestions on "vacation home" locations that in your opinion would make a good investment in the coming 5-15 years.

[Sean]

One of the factors that seems to be left out of most RE news items like this is the flagging economy. The loans going to default aren't just the crazy 2 year arms, or those given to sub-prime borrowers - 'normal' people are losing their jobs and being forced to bring expenses down.

This market has a ways to go before the bounce...

[Dan]

I don't feel sorry for the banks or the borrowers. If the lenders had verified income and debt on applications of these borrowers, then most of them never would have qualified for the loans in the first place. That means the lenders were sloppy and deserved to get wacked. It also means the borrowers were dishonest and deserve to get wacked too. Now Obama and Hillary want to use my tax dollars to make sure these losers live in a better house than me. I will be getting punished for living within my means and compelled to subsidize the irresponsible behavior of these creeps. Nice.

[Alfred]

This is indeed a painful process. PRICES were bid up and up and up with no regard to VALUE for years, in the false belief that real estate was a source of fast and easy money. One's home transmogrified into a giant ATM machine. People lived like there were no tomorrow. Well today is 'tomorrow' and the chickens have come home to roost. Unfortunately, the swindlers in the moneylending industry who wholeheartedly encouraged and enabled this irresponsible behavior will get burnt the least by this shakeout.
The bright side is that when this is over, prices will hopefully have descended to a level where the average person no longer needs to move out of the state to find a home they can afford.

[blackbox]

Fantastic!!
I love the smell of foreclosures in the morning.....
smells like affortability!

[JD]

Welcome to the final stage in the war on the middle-class of America. Funny that everything else appears to be increasing in price because of the rapid and continuing decline of the dollar. Doesn't really make economic sense now, does it?

[Karl Christen]

Interesting reading some peoples heartless comments about some of these people facing foreclosure. Let's be honest folks, allot of these people who had to get $600k mortgages were in situations where they didn't have much of a choice. Yes, they could have rented, but then the government rips their hearts out with higher taxes. Yes, the homeowner does need to take responsibility, but some understanding about 2004-2006 markets in Southern California need to be taken into account. There simply were not affordable homes for homeowners to purchase during this time in certain counties.

The real issue is the equity strippers, and investors. There is going to be serious fallout with this group of home owners, and frankly if you have little sympathy for this group, then I totally agree. But when it comes to the average home owner that works within their community, the pressure to get the $600k mortgage was extremely high, unless they wanted to move to Nebraska or Oklahoma!

[Ben Wilson]

Those of you who are single have no idea how much pressure a woman can put upon you to buy a nice house. Especially women who don't work themselves. They have nothing to do all day but think about what they see on television, and why they don't have it. Did you know that the average sitcom family would need an income in excess of $300,00 per year to maintain the lifestyles depicted? Then there are the home shopping channels relentlessly pushing things nobody needs 24/7/365. People feel that they are somehow lesser beings if they don't have all the ruffles and frills that this culture enveighs upon them to purchase. My son goes to an urban school where 80+% of the families qualify for free lunch. We don't, yet he is the only kid without an I-Pod and cellphone. Hmmmm...cause and effect here? And yes, my stay-at-home wife is angry that we haven't built a monument to our egos, financed by endless debt. But the aforementioned kid will be able to go to college.

[blabber butt]

With all these people no longer having a mortgage to service they will start to invest their money in the stock market and the Dow will soar to 50,000 or higher.

The more foreclosures the higher the stock market will go! Buy stocks now! Might I suggest some Goldman Sachs! You will get so rich you can pay cash for a mansion next year.

Walk away today and get rich in the stock market by tomorrow.

[nokidding]

With all the bad news out there about housing and gas being $4, but the stock market still hot as hell. WFT is going on. I really don't get it. It's also pretty funny listening to the radio and hearing terrible numbers on housing and yet you always get some optimism from housing expert.

[Cal]

dave:"TWENTY MILLION active mortgages in california"

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

So every home in California has an average 2.5 loans on it?

I heard from a friend of a guy whose Dad is a Math professor at MIT that 84% of statistics are made up on the spot.

[JJ]

BURN BABY BURN!!

All these geniuses who were talking about how much money they made in real estate 3 years ago are getting what they deserve.

[SanDiego]

This is just the reality of poor decision making. Each of these former homeowners with a few exceptions literally signed up for future forclosure when signing their loan documents. There should be a line of homeless families roaming the streets with poor credit records and I say it is well deserved. I am so sick of all the excuses. There is never a free lunch and late at night when we can't sleep, we all know it.

[Dan]

Securitizations were the problem all along. They allowed underwiting criteria to loosen up to the point where people could borrow who were unable to repay the debt. Let's get back to the old-school Fannie Mae guidelines. 80% LTV, 680+ FICO, DTI under 40%, documentation of income and debt, etc. When all else fails, try common sense.

[Dave]

If this gets as bad as it looks like it will then the banks - not the homeowners will get whacked.
I'll bet that the trend in the future will be "short sales", where the buyer negotiates with the banks to sell the place for whatever is owed on it if possible.

At least that method is cheaper for the banks than having to foreclose...

[Apeon]

So, 327% up in CA, hmmm, let's analyze the areas where, say70%, of the defaults occur, say, CA, FA, TX, wherever, and then develope a policy to deal not only with the mortgagees, but also the mortgagors and their asscociates responsible for profiteering off of peoples gullibility.

[Dan]

If you are a borrower who took out a loan that did not require you to document your income or your debt and you fudged the numbers a little to make it work, then you deserve whatever you get. You were dishonest and now it's time to face the consequences of your actions. And if you can't face those consequences and now want the rest of us tax payers to cover you, then you are truly contemptible. Because now you aren’t just stealing the lenders money. You now want to steal my tax dollars too.

[E]

For all the people who are wailing...

IT'S ONLY A SMALL FRACTION OF THE MORTGAGES!!!

Could you all please stop supporting gooberment involvement?

Thank You.

[tex]

You People Dont get it , THE BUILDERS ARE THE ORIGINAL LENDERS!
conflict of interest?

[Dan]

Home prices will continue to drop in many areas such as California for a while. It's going to get worse before it gets better. When securitizations artificially inflated the pool or borrowers/home buyers, then prices went up. Now that securitizations have tanked and fewer people qualify for a home, there are more homes than borrowers and the price will drop until a new equilibrium point is reached. The worst thing we can do is to try and artificially manipulate the housing market. We need to let market forces do their job so we can quickly reach realisitic, sustainable housing prices again.

[Mike]

LOL@ The people who think foreclosures only affect those people being foreclosed on. Neighborhoods with foreclosed homes see a drop in ALL property values around it. Whether or not these other people are in loans they can pay. So as long as you don't mind your home losing value as well it should be 'no' problem for most of us.

[Mike in KC]

To the person wondering how the collapse in the ARM market will lead to defaults in the fixed loan market, follow this logic:

ARMs start to default pushing down the valuus of homes in general. By what percentage, we don't know.

Homeowners with fixed mortgages are also in homes with declining values.

Eventually, there is a possibility that these owners will also owe more than the place is worth and their equity is not enough to keep them in the house.

They'll then also just walk away.

[George]

Anybody with a brain should have seen this coming. We did and sold our California home at the peak of the market. We took the money and ran as fast as we could to Oregon. We bought a very nice home here with part of our gain and invested the difference (over $250,000). Our California home is now worth $150,000 less than it was when we sold it. Our Oregon home is holding it's value. The benefits of moving to Oregon go far beyond real estate values. This is a much kinder and gentler place to live. I do not miss the "in your face, the heck with you" culture that is so prevalent in the so called "Golden State"

[dr fager]

joel,

if ca is anything like fl you should wait. we are at least a year away from a bottom here. i expect prices to drop another 25%.

[James Varela]

I lived in Los Angeles ( Palos Verdes-Torrance) from 2000-2001 and was always amazed given incomes in Los Angeles property prices were so high. A realtor told me that wealthy land speculators were largely to blame and it appears the bubble burst we are seeing is the mother of all corrections predicted for so long. I feel so bad for some of these people, many are in over their heads now due to the same failed economic policies of BUSH I that destroyed the Savings & Loan industry. The foreclosure vultures must be having a field day out there. Florida where I am now got hit hard too. Miami in particular.

[JEFF]

I can't believe people are still buying overpriced homes. Prices will come down another 15% or more. I guess it's because most Californian's are rich & don't mind throwing 75K out the window...

[E]

For all the bleeding heart liberals.

THEY DIDN'T HAVE TO BUY A 600K HOME!

THEY COULD HAVE RENTED!

THEY COULD HAVE RENTED!

THEY COULD HAVE RENTED!

THEY COULD HAVE RENTED!

THEY COULD HAVE RENTED!

THEY COULD HAVE RENTED!

oh....but there was a "tax break" from buying.

WELL...

LOOK WHERE THAT THINKING GOT THEM!

[ex-Californian]

I'm not surprised. I moved to the mid-west - flyover country to the elitists on the coasts. But we're not having forclosure problems. Anyway, every time I visit California, I shake my head at the high degree of materialism goin going there. I'm glad I left.

[davenjan]

Big surprise...people have found out that you can't buy a 4000 sq. ft. house without comensurate income. Our 1286 sq. ft. home sits on 6.7 acres of land....and has been paid for since 1984. No, we're not 90 years old; we're 60, which means the home has been fully paid for since we were 36 yrs. old. We're not rich either...I didn't go to work until 1986 (only part-time), and our combined income didn't hit $40,000 until 10 years ago. We've raised two kids, both of whom have put themselves through college and graduated with NO STUDENT LOANS. And yes, we live in California (although we are in the northern part of the state). It's called living within your means, and can be done. Priorities, folks...priorities.

[Dan]

This is for "E". If only 1 out of 20 mortgages goes bad, that is still enough to tip over the housing market and to throw most lenders into bankruptcy. 5% forclosures rates are not sustainable. Trust me. I used to work for a 2 different mortgage companies. I worked in accounting, loan servicing and worked on securization transactions. If you want, I can explain how accelerated prepayments or higher than expected foreclosures can bankrupt a mortgage lender.

[redmund sum]

Give us the whole truth: How many of the foreclosed homes were owner-occupied?

[il_logic_el]

I sure wish those home owners knew to demand the so-called lenders proved they "owned" the notes they were foreclosing on!!!!

[il_logic_el]

I sure wish those home owners knew to demand the so-called lenders proved they "owned" the notes they were foreclosing on!!!!

[Bob]

I would like to see the statistics of the types of mortgages that are foreclosing. Also would like to see who was the initiating bank/broker.
My hunch is these "exotic" mortgages are at fault, meaning the loans did not really fir the borrowers current circumstances.

My answer to this issue is "tough". The banks/brokers
are losing their businesses/jobs due to bad decisions, the borrowers are losing their homes due to bad decisions, and the stockholders are losing their value in their stock due to bad decisions. Everyone involved ispaying the price........

The government needs to stay out of this fix....as a fix like this only benefits the ones who made bad decisions!
This becomes a source of homeowner welfare....and it is not right!

[Stephen G]

It is starting to snowball. A freind's condo association raised the fees to cover the now-unoccupied units. But all that did was help another underwater owner to decide to just walk-away.

[dan]

The mortgage crisis is only a small taste of things to come. Wait until you guys see the credit card bubble pop. For over a decade Americans have been spending more than they make, running up their credit cards and rolling the debt into the fictitious equity in their homes. Now what are they going to do? As credit card defaults mount and lenders tighten everyone’s free and easy access to debt, we are going to see a big drop in consumption that will have a cascade effect across our economy unlike anything we can imagine. We have been living beyond our means for a long time and the economy is about to hit the reset button and bring us all back to reality.

[Darren]

Hmmmm... Everyone seems to be reading the "fine-print," However, nobody seems to be mentioning the little section that says: "If the actual market value of your home is less than what is owed on your loan, the lender reserves the right to declare the loan due in full, immediately."

This is in my (FHA) fixed rate mortgage papers from Wells Fargo, June 2001 (my attorney informed me that this is a standard clause in ANY mortgage).
All it takes is this STANDARD contractual clause, combined with some emergency that forces the holder of your note to acquire capital very quickly... even at pennies on the dollar.
Many RESPONSIBLE homeowners around the country are already upside down on their mortgages because of the deflating market. The banks could call any of these notes due at any time... GO READ YOUR MORTGAGE PAPERS!!!

THAT is how this little mess could spread beyond the sub-prime mortgages.

Trust the bankers... they are your friends... they would NEVER do anything to hurt you...

[Dave Walsh]

Remember when the chief economist of the National Association of Realtors was telling everyone what a great time to buy it was? That is what their chief economists job is, no matter what the market conditions, they will put it in the rosiest light, to the point where it's downright fradulent.

[John]

This real estate meltdown is one of the most interesting things that has happened recently.

You have to admit it's pretty funny. Remember all those people that really believed that prices had nowhere to go but up, and that if you didn't buy you'd be "priced out forever"? With any luck, it'll be a cold day in hell before they buy a home again.

[Sonja]

I have no sympathy for homebuyers who spend beyond their means. Nor do I have sympathy for banks or real estate agents. Home prices have become artificially exaggerated due to mass immigration. Houses in Van Nuys were going for half a million dollars...THAT'S VAN NUYS!! The entire real estate industry and all those businesses connected to it deserve this meltdown.

[jay]

Is it any wonder CA is in such a mess. Who in there right mind would pay 500K for a 1200 sqft home??? People in CA have been taken for years in the real estate market.

[Laars]

This means my kids might actually be able to own a house one day... very good news for the future.

[Rob7t7]

I don't feel bad for any of the idiots that live in California. They are getting what they deserve. That state is a joke and so are it's people.

[Steve S, San Francisco]

The key is the number of people who are upside down. If you are, it makes more sense to default than to pay your mortgage. With each person who does this, the next guy on the block gets closer to doing the same thing.

Don't panic... but, if you panic... panic first.

[Dan]

davenjan, if more people were like you then the government wouldn’t have to spend nearly as much time worrying about how to redistribute income from those who earn it to those the politicians deem to be more “deserving”. It’s sad, but self-reliance has become a quaint idea.

[DANIEL]

Burn baby burn!!! I'm happy to watch the real estate market sink--so many people with ordinary incomes got shut out after the prices skyrocketed that its nice to think I will be able to afford something other than renting again--So I say, let the market burn.

[Dan]

Nonowner occupied homes are definitely part of the problem, but they aren't the biggest part of it. The worst thing that happened was the removal of documentation requirements with respect to borrower income and borrower debt. Getting lax on borrower documentation did more than anything to put people into homes they could not afford.

[Hugo Chavez]

Yes, JBJM, most of these foreclosures are likely to be to illegal immigrants: they are the original illegals - white Europeans who thought they could steal this land and them buy and sell it! Prices to go down 100%, with land and houses to be given back to the natives!

[RationalGal]

When I bought my house 10 years ago, I got into it as a first time buyer with 3% down. Having said that, I bought a house I could afford - refinanced it at a lower rate & quicker payout (15 yr) 5 years ago. My house note is still less than $650/month & I add to the principle monthly also. When I bought, my real estate agent recommended the most expensive house I could qualify for but I, being a realist, bought a house I knew I could make payments on even if I were out of work for awhile.

It's all about personal responsibility & common sense. I used a program to get into the game but once there, I exercised restraint & planned for the long haul. I'm also not trying to impress anyone with the house.

[otherangrybitterrenter]

E,

Why are you so angry? You sound so bitter? What's the problem?...didn't get in when it was good? afraid you'll miss the bailout? Upstairs neighbor making too much noise? Someone parked their car in your spot?

We are in this together, whether you like it or not.

[Hugo Chavez]

Boy, Matt Drudge sure saved the decreasing # of comments on this blog.

[150 multiple choice questions]

Those who say "but x% of mortgages are being paid on time!" simply do not understand the real problems.

Yes, only 2 or 3% of mortgages are currently delinquent, but that number is accelerating quickly - the trend is what's really important. Not long ago foreclosures were well under 1%. When it reaches 4 or 5% of mortgages in default it's a financial meltdown because of the amount of leverage used and the amount of impact a dollar spend on real estate has on the economy (multiplier). Trillions of dollars of spending have been and are being removed from the economy with nothing to pick up the slack.

And most importantly, THE FORECLOSURES ARE WHERE THE HOUSE PRICES ARE SET! Which is a situation that's going to continue to drive prices down.

[Fred]

I'm an executive recruiter who does a lot of work in SOCAL. This is a fantastic development for my clients, who have struggled for years to get people to relocate to this insanely overpriced and overhyped real estate market.

No problem now.....

[Andrew Z]

Are there any numbers on the rate of default on HELOCs and equity loans?

Or maybe the amount of homes that have a HELOC or equity loan in the state that could be foreclosed on.

Just curious because the talk of "walking away" gets thrown around a lot and I know a bunch of people who CAN'T walk away without some SERIOUS repercussions.

The banks will be able to go after these people but I'm wondering, if the numbers get high enough, will the banks have the staff/means to do this.

[eric]

Seems like everyone sells snakeoil these days, including the Los Angeles Times who has multipal realestate sections in their Sunday edition.

[Cyril Thompson]

I see a lot of people talking about all the "idiots" who bought overpriced homes with little ability to pay. As a real estate professional who is helping good, well-meaning responsible people, who are in a short-sale situation (and getting little to NO cooperation from their lender) because of UNFORESEEN medical conditions, I say shame on you! Your glee at the misery of hard-working and honest people will not last as you realize that just because you kept your money out of real estate you are not immune to the trauma which has been wrought on our economy. How heady will you be when you boss "downsizes" you? Feel vindicated because you didn't buy at the peak? You won't feel the same way when gas is at $5.00/gallon and you are in a long line at the unemployment office. Think before posting such crass and ignorant comments. Real estate is, and always has been, a long-term investment. Those who take a short view will almost always get burned. For many unfortunate people out there, they COULD afford their homes. Until they got cancer, lost their job, lost their spouse, etc. In more normal markets, they would just sell. This market will not allow it.

[Michael Coleman]

maybe if you get rid of illegal criminal mexicans ,and put the americans to work,they can pay there bills.the illegals bankrupted the whole state.

[Inland Empire]

Thanks. Also, I'd appriciate any suggestions on "vacation home" locations that in your opinion would make a good investment in the coming 5-15 years.

Kingman AZ!!! Near the river without the heat, near Laughlin, near Vegas, Near skiing in Flagstaff etc etc.
You can buy a house that pencils out as a rental as well.

[Andrew Z]

Joel,

You are looking at some pretty pricey areas in San Diego when you mention the likes of La Jolla and Solana Beach. If you find a 3 bedroom for $280K that's pretty damn good.

I would be interested to see exactly where it is at that price and if the foundation is indeed intact, but that's a hell of a price.

I for one would pick Solana Beach, Encinitas or Leucadia over any area in San Diego for a vacation home. Really cool "beach" towns with plenty to do and not far from downtown San Diego if you want to head that way.

[Corntrollio]

dave at 11:32, and Red Fred at 11:46, you're really clueless. There were 3000 SFRs sold in LA County last month (http://www.latimes.com/classified/realestate/news/lat-
dataquick-
sundaychart-april16,0,3771584.htmlstory). If the number of foreclosures goes from 200 to 400, for example, that has a HUGE effect on the market.

Comparison to the overall population is completely irrelevant. What is important, to determine the effect on sales prices, is comparison to total numbers of sales.

[Cyril Thompson]

I see a lot of people talking about all the "idiots" who bought overpriced homes with little ability to pay. As a real estate professional who is helping good, well-meaning responsible people, who are in a short-sale situation (and getting little to NO cooperation from their lender) because of UNFORESEEN medical conditions, I say shame on you! Your glee at the misery of hard-working and honest people will not last as you realize that just because you kept your money out of real estate you are not immune to the trauma which has been wrought on our economy. How heady will you be when you boss "downsizes" you? Feel vindicated because you didn't buy at the peak? You won't feel the same way when gas is at $5.00/gallon and you are in a long line at the unemployment office. Think before posting such crass and ignorant comments. Real estate is, and always has been, a long-term investment. Those who take a short view will almost always get burned. For many unfortunate people out there, they COULD afford their homes. Until they got cancer, lost their job, lost their spouse, etc. In more normal markets, they would just sell. This market will not allow it.

[kent]

I bought four homes in several So Cal developments around the Coachella Valley before they were ever built made a total of about 800k bought these in 02 sold in 05 took the money and bought a 15 acres hilltop ten miles north of Branson Mo had the Amish build me a 3500 sq foot log cabin type A frame all for 350k .
Cant wait for the next So Cal housing buble happens about ever 15 years or so.

[Bob]

I went into foreclosure because Uncle Sam said so by giving me incentive to walk away from my obligations without being held responsible for the loan. There will be no 1099-C issued by the Bank and is a gift from the Feds.
You can rant and curse as much as you like, but the truth is that we are given green light to walk away without future obligations to nobody. LOL.

[E]

Dan...my comment was tongue-in-cheek.

Anybody that bit off more than they can chew should get foreclosed on. If the lenders go bankrupt...well...you know the saying...you made your bed...

End of story.

[the Dude]

Let them fry! Oh wait, maybe Obama can save them. HaHaHaHa.....

[Jake]

Now is the time to buy, if you can afford to make the payments.
My wife and I bought our first home for $35,000 in Huntington Beach in 1974 with a 100% VA loan while I was still in the Marine Corps. I was promptly sent overseas for a year. When I came back in 1976, we sold that home for $54,000 and bought our second home, a classic Greek revival, 1800 sq. ft. on two city lots, originally constructed in 1920, for $64,000 with a 30 year 80/20 conventional mortgage, still in HB but in the "old town" area, closer (six blocks) to the beach. We tried to sell in 1980 but the "SoCal housing market bubble" burst. We had to move to the East Coast, so we rented. The renters trashed our house and we had to pay for repairs and even borrow from our daughters college fund to make payments between renters. It took five years for the market to work out the "bubble's excess speculation", but in 1985, we leased our house to a young man who paid extra for an option to buy. In 1987, we sold our house to him for $180,000. He promptly tore it down and built two giant glass monstrocities and sold them for $600,000 and $700,000 respectively.
California real estate has always been a volatile market, but it has always rewarded those with patience. This too will pass and when all the huffing, puffing and hand wringing is over, those who buy and hold will prosper.
Jake

[VO Reason]

47k per quarter is nearly 200k per year. Maybe that's only 1%, but 200,000 is a very big number, even for Californica

[Thomas]

I've seen it noted that one of the main causes of increased foreclosures is declining house values.

Since whether your house is worth as much as you paid for it shouldn't ordinarily affect whether you can afford to pay your mortgage (unless you're taking the drastic step of "walking away" just because of the decline in value -- a gamble, considering your credit rating gets shot), why should declining property value alone cause foreclosures to rise?

'Cause a bunch of idiots have apparently been Ponzi-financing their home purchases, by extracing equity via serial refinancings and using the extracted equity to make mortgage payments. When home prices stopped appreciating, there went their ability to continue this trick. No more equity extraction = no more ability for $80,000 earners to service $600,000 loans. Checkmate.

[Brian]

Rents might equal a mortgage payment if your lucky but in the context of $0 down financing rents are lower than mortgage payments. Property taxes are where the "tax savings" of the mortgage interest deduction is soaked up and the holder of the house is left in the same position as a renter tax wise.. When you layer in declines in home values and the cost of maintenance, renting looks pretty darn good.

[dan]

I blame the builders in collusion with the banks for some of this mess. in riverside, there has been a massive buildup of 3000-5000 sq ft homes since 2002. in the beginning you could buy one for $300-400,000. by 2006 they had escallated the prices to over a $1 M. Those who bought at the top were stuck with a property worth about 1/2 what the owed. and the banks working with the builders bought into this rapid unsustainable increase. many people are walking away. I have seen several forclosures recently resold at 1/2 what was owed the bank. There is still a glut and the builders are slashing prices to dump their inventory. It will be a while until this well is dry.

[Big Horn]

Interesting note - Reading the Trustee Sales in the Ventura, CA Newspaper revealed that the majority of the homes in foreclosure were vested to "single men or women" or to married individuals taking the property as a "single married person". There were not as many married joint owners. Looks like the filp the house investors got caught in the downdraft.

[dude]

Last time forecloures were this high was during the recession of the early 1990's, which resulted in the popping of the real estate bubble of the late 1980's. Ironic how history repeats itself.

[Jim]

I'm with the renters on this one.

My wife and I made the painful decision that it didn't make any sense to buy property, so we've been renting while all our friends and families told us that we were fools for not buying.

For all those people who claim they "had no choice," that's a big lie. We considered moving to Southern California, but the real estate prices were so ridiculous that we decided to change our plans rather than make such a huge financial mistake.

Even if your job moved you there, you had the option to take a different job instead of moving. If you lived there already, you had the option to move to a more reasonably priced area.

There were options. Maybe you didn't like them, but they were there. Nobody *made* you buy an overpriced piece of property. Now that you have, you think I should feel sympathy because you took the easy way out instead of making hard decisions like my wife and I? Yeah right...

As far the government is concerned, they need to get their noses out of it. The Fed crashing interest rates in a futile attempt to stave off the inevitable has already caused the devaluation of the dollar already: increasing the price of oil and everything else we import in this country. So it's just another case of people making sound decisions having to pay the price for those who don't...

Thanks a lot, morons...

[xtine]

Karl Christenson -

I'm sorry. Your comment is absurd.

If you can't afford it, don't buy it. And don't whine about it. God. No one forced you to do anything. These homeowners drove up prices for those of us who could just have said no (and did. repeatedly)

"The average home owner that works within their community, the pressure to get the $600k mortgage was extremely high"

I don't know what you mean by "Works within their community." I know people who work in Beverly Hills. Does that mean they have to buy there? And the "pressure" I know....sure. Like drug pushers on 14 year-olds. The PRESSURE is the culprit. Not children in adult bodies who can't do simple math. Or take responsibility for their mistakes....they whine about the pressure.

Tell me why people who DIDN'T fall for the "pressure" who rented and got their "Heart ripped out" in taxes for YEARS should care about a blubbering whiner who HAD TO HAVE a 600K house.

Just tell me why?

[Frycook]

Anybody remember the old days?

Here's some tidbits from a CAR report covering 2006:

"The median down payment for first-time buyers decreased from $25,000 in 2005 to $10,000 in 2006"

"About a fifth of all homes purchased (21.1 percent) were financed with a zero-down payment mortgage compared with 19.7 percent last year. Recent use of zero-down mortgages has increased significantly since 2000, when they were used by just 4.5 percent of buyers. Two of five first-time buyers (40.9 percent) made a zero-down payment on their home purchase"

"The typical first-time buyer had a median age of 35, earned an annual household income of $80,000, and purchased a home with a historically high median price of $450,000"

har har har!

And people wonder at the bust two years later?

[Andy]

I wonder how much illegal immigration and easy-to-lend banks are behind the crisis in California housing?

[grizzles]

Many years ago (1973) I had a friend who had a rich relative who was in banking. This is what he, the uncle, said to my friend:

The level of personal savings is considered by us, in banking, outpacing what the people are spending. We're not in the business of mugging prople on the street or strongarming citizens. For us, the only way we can get at your life savings is to have you give it to us so we have a plan in place to do just that. we're going to ask you to give us your life savings in order tp purchase a home - since conventional wisdom says that's a debt you can afford to have. We'll allow people to acquire properties and homes that are beyond their reach. They will default, we'll have their life savings, and have our hands on the property.

I paid no attention to it since I was a young man, but since that tiem I've seen this play out often, Is there anyone out there in the banking community that has heard about this before and can comment???

[Willy Brown]

It’s not the federal government’s problem the you bit off more than you could chew so quit you’re sniveling and stay out of my pockets to fix your mess.

[LA]

Ten years ago, my friends walked away from their modest house in Historic Old Torrance because they bought "high" (in the low $200s) and their mortgage was upside-down. Before the present downturn (which hasn't had much impact on Old Torrance YET), her house would have sold for around $700k.

This time isn't like that. This is more like the dot.com bust. Remember? A bunch of people rushed to get in on a good thing and the demand caused tech stocks to inflate to artificially high prices that had nothing to do with actual value. Tech stocks imploded just as RE is imploding now where homes are overvalued.

I remember how this cycle started because I was trying to buy my first home. It began with falling interest rates, then high loan-to-value deals, 80/20 and 90/10 no downs with a 2nd mortgage, and then the financing got more and more creative as prices increased and our consumer culture spurred people on to buy, buy, BUY! Like piranha, I tell ya!

Joel - now is NOT the time to buy in So CA. Read this blog every day and don't listen to realtors. You'll know when it's time to buy. Among the signs:

- Lots of adult school classes on what to do with a real estate license (other than sell real estate)

- Your wall calendar will say "2012."

- You make a really, REALLY insultingly low-ball offer on a really great house and the realtor mists up, wants to name his first kid after you, and pledges to give half his commission to the local homeless shelter.

[Josh Berlin]

My wife and I have been waiting for 6 years for this to happen. We have been saving everything we can and once this market bottoms out we are going to put $100-150K down on a home (saved that with only a combined 100K income) and then let a renter pay for our retirement! Thanks to all you greedy/keep up with the jonses/35 foot toy hauler/24 inch rim escalade, hummer driving/30 foot deep sea boat buying retards! You have driven housing to absurd levels and I'm going to retire by 40-45 by not buying into the hype of home ownership ove the past 5 years. Drop prices drop! Love it!

I live in So-Cal and am so sick of the image war that goes on out here. Whoopity Doo! You drive a escalade! OH JOY! And you "own" a 4K sq ft home! You are such a cool/good person because of that! umm... NO SUCKER!!!!

[daveescaped]

Where did someone get the figure of 20 million mortgages in California? Seems impossible. That's like .7 mortgages for every man woman and child. Does that take into account second mortgages? That wouldn't make sense as there is still only one homeowner. My guess is that there are like 30MM people in CA. That might translate to 10 million homes with about 9 million mortgages. Just a guess. But then apply the likely 250K foreclosures. And that is just ONE YEAR! That is a big chunk.

But I echo the sentiments of others. Let the folks fry who bought too much house. I work my butt iff and rent because I know 80K isn't enough to afford a house in CA. I drive a $2,500 car so one day I'll be able to get a house. Probably from one of the suckers who didn't play it smart. We all knew the rules. I have zero sympathy.

[who cares]

Lots of good comments here. But don't worry our Congress will fix everything!!! They will bail out the people who made loans to people who should have never qualified and let them them keep their homes. Then bail out the lenders who knew the risks of the loans. After all this is America and everything is someone else's fault. Just ask a Lawyer.

[Working Stiff]

A review of the 2004-2007 monthly periodicals for Mortgage Banker Association explain exactly how this happened. First, lenders wanted to maintain the number of originations (and resulting profits) from the refinance boom that occurred between 9/11 and 2005; they did this by increasing the pool of people who qualified for mortgages by using unconventional financing (piggyback, ARMs, 100%, etc.), then in 2006, they started to get even more desperate in their attempts to keep the volume of originations up. Lenders used a variety of methods to sell or market their loans. In 2007 hedge funds which had invested heavily in real estate securitizations couldn't cover margin calls, and the resulting investigations revealed that the real estate that backed the securitizations wasn't worth its stated value. That led to a practical freeze on the securitization market because investors were afraid to purchase real estate backed securities. That freeze on securitizations led to a wider credit crunch. That credit crunch led to a practical freeze on refinancings. When people with resetting ARMs could not refinance their mortgages, that led to foreclosures. The foreclosures (which grew and in some places became epidemic) flooded the market and led to decreasing appraisals, which led to lower sales prices. Those lower sales prices caused most real estate to lower in value. This lower valued real estate caused buyers to stop in their tracks for fear of becoming upside-down in a new mortgage.

That's where we are today. Waiting for real estate prices to come to some kind of equilibrium where buyers, on the one hand, will go out and buy property without fear of a downward valuation and lenders, on the other hand, will loan money without fear of foreclosure.

And the next shoe to drop will be skyrocketing tax rates because land values are going to be so much lower tomorrow than they were last year.

But the next big crisis is the credit cards: few people know that credit card debt is bundled and sold just like mortgages were bundled and sold!

[mattnnz]

I think forclosure is a rational response by borrowers to the down market. If you put no money down and the house is worth less than you paid for it. Why stay in it when you can rent for less? Imagine you lose your job and find another out of state. Better to forclose than keep plowing money into an upside-down mortgage. People are actually reacting rationally. Nobody has ever died from bankruptcy they dont take you to debtors prison. Credit can be rebuilt with a car loan with a crappy APR. Let the lenders hang; they didn't ask for the down payment to keep the borrower from walking.

[BluestateCon]

Is this a shock? CA taxes/fees/energy is highest in the nation thanx to lib policies. It's no wonder folks can't afford to pay their mortgage!

[Bruno Hauptman]

HOLD IT! I need to get some new batteries for my Give-a-Damn Meter---the needdle won't budge!

[Dennis in Ohio]

On a very recent vacation to California, we revisited places we lived in the 70's. This was actually a frightening experience in some ways and illustrates just how much California has changed in 35 years. In 1972 we lived in Rancho Cordova, a nice suburb of Sacramento. Our previously almost new and very nice neighborhood was now a Spanish speaking gangland area and the post man on the beat warned us to not come back after dark! We then went to Vacaville, a town that had six-tupled in population since 1973. We bought a nice 4 bed/2 1/2 bath home there that year for $32,500 (custom built for us). We sold it only 14 months later when I was reassigned from Travis AFB for $43,700, an extremely quick 34% gain - unheard of anywhere else at that time. We visited the current owners of the home and they said they would be happy to unload it back to us for $380,000 (A similar house in Ohio would be worth MAYBE $170,000, but probably less due to the poor construction standards in California vice Ohio). They told us the home had been appraised for $500,000 as recently as 2006! We counted one home in five in this still attractive, but now rapidly declining from neglect neighborhood was either in foreclosure or for sale and it was obvious no one was buying - yards were uncut and houses had been abandoned. In this market, the REAL value of the house - under 200K, is sure to be achieved in a couple more years. How could people qualify for a 500K in a place where the average income is only slightly higher than what we make in Ohio? The fact is they couldn't, but with banks eager to lend and ignore the rules, this is the result. The same situation exists in AZ, FL, and up and down the East and West coasts. Luckily in the Midwest, we never got into this crazy situation and thus we won't suffer in the downfall, but the entire economy will suffer greatly until all these homes are brought back down to realistic values in relationship to area incomes. What ever happened to buying a home worth no more than 2.5 times your income and with a big 10-20% downpayment to boot? What pocessed everyone to get involved in this form of Russian roulette? Why would you stay in a home that is worth less than you owe unless you were concerned about your credit rating. It is obvious now from the look of things, even the threat of bankruptcy and trying to save your reputation is no longer an incentive to save you! Sad. Sad.

[Frank Jones]

and Henry Paulson and other NY investment bankers continue to laugh all the way to the bank and to their $50 mln third homes.

Why did Henry Paulson, our treasury secretary, vote to bail out his cronies on wallstreet with tax payers money???

Because had Bear Stearns gone down, Goldman Sachs was four steps away from the same outcome and Hank would have personally lost 100's of millions.

If congress was'nt bought and paid for by the Wall Street special interests they would have thrown big Hank out the day after the Bear Stearns bailout.

After all Bear Stearns was the leading underwriter/creator of the very 2/28 ARM's that are blowing up like little timebombs in everynieghborhood across the country.

Write your congressman it is time to take back America.

[Wayne]

People were buying houses they couldn't afford because they thought they would be able to sell them in a year at a tidy profit. Dirt Merchants were enabling these folks and bank were making home loans to people who were in no way qualified.

Paid off our house last fall. We never charge more than we can pay off in a money. Sorry, I can't feel sorry for those folks. We don't have the toys they have but we LIVE WITHIN OUR MEANS.

[Shane]

Wow Stephen, thats amazing. Your home owners association is raizing fees to make up for lost income from vacated homes? Isn't that just like California politics in general though. The state is run entirely by Democrats and their philosphy is, if their aint enough funds to go around..raise taxes then.

Hey folks, I have a novel idea. Why don't you instead of raising fees/taxes instead CUT YOUR SPENDING? California is in the mess its in because of the socialist thinking in charge of its finances. High taxes has nearly drained silicon valley of high income technology businesses. It's no wonder your housing is collapsing statewide. Joe engineer who used to live in San Jose moved to Arizona with his company!

Your state legislators in their infinite wisdom decided to raise the taxes on whom remain, thereby forcing more of them to leave and even lower budget intake! Don't believe me? Take a drive down First Avenue in San Jose and just look at the corporate vacancies in Sunny Vale, Milipitas, and the entire Silicon Valley area. Its harbringer of whats happening to your state.

California is doomed.

[Ordinary Lass]

I'm sorry, but I do lack sympathy. We like on a single, modest income supporting two kids--and could easily sell our home over 120K what we owe today. It's all about the mantra of living within your means. When we want something new, we save, and pay cash. We have one car. We moved out of the status oriented area to a stable, affordable community. We do not have ANY credit card debt. There is no shame in saying "no" to this kind of consumerism. We'll weather this storm without a single worry, because we can pay our mortgage even on unemployment.

[JRLDEV]

We are not seeing the end of it yet. The next step (for the
banking/mortgage holder industry) is trying to "get out" of
the "reverse mortgage" business.

[Nurse Ratchett]

Thank God Hillary and Obama want us taxpayers to bail these people out !! Now I will be able to sleep at night (In a house I can afford)

[Christine Baker]

Rick posted:

"Nothing is more hilarious than hearing about a family who has an SUV with 24" inch rims on the driveway and yet cannot pay their mortgage. Let 'em fry."

Actually, nothing is more hilarious than a bank more than doubling the interest rate to 26% for someone with PERFECT credit and then getting nothing because the consumer tells em to take a flying leap and doesn't send another payment on a $8,000 balance.

http://mylitigation.net/pr/news/release/
open_letter_to_wamu_my_refusal_to_pay_my_
8000_wamu_providian_visa_card/

And what makes it even more hilarious is that other banks subsequently raised the rates or closed accounts and they also don't get another penny.

It's all so hilarious!

Vote with your money!

Let the banks fry!

Christine Baker