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

[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.