Next foreclosure wave is in view

 

That much talked about "next wave" of foreclosures is on the horizon, according to a report by The Times' Don Lee:

Amid rising unemployment and falling home prices, mortgage defaults have surged to record levels this year. Until recently, many banks have put off launching foreclosure action on the troubled properties, in part because they had signed up for the Obama administration's home-stability plan, which required them to consider the alternative of modifying loans to make it easier for borrowers to make payments.

Just how big the foreclosure wave will be is unclear. But loan defaults are up sharply. And with many government and banks' self-imposed foreclosure moratoriums expiring, the biggest lenders indicate that they are likely to move more aggressively to clear up a backlog of troubled mortgages.

... rising foreclosures will depress home values, pushing more homeowners underwater. Mark Zandi of Moody's Economy.com estimates that 15.4 million homeowners -- or about 1 in 5 of those with first mortgages -- owe more on their homes than they are worth.

Out-of-work homeowners aren't going to qualify for loan modifications.

California accounts for an outsized share of mortgage loan defaults. A stunning 135,431 homeowners in the state were hit with notices of default in the first quarter, an increase of 11% from the earlier peak in the second quarter of 2008, according to real estate information service MDA DataQuick.

On top of state IOUs, budget woes and a statewide moratorium on housing foreclosures, California will be working its way through this for a long time.

-- Lauren Beale

Thoughts? Comments?

Photo: A sign promotes free bus tours of foreclosure properties outside a real estate office in Victorville on June 15, the first day of a 90-day moratorium on foreclosures. The California Foreclosure Prevention Act pressures lenders to work to keep borrowers in their homes. Credit: Robyn Beck / AFP/Getty Images

Comments

[danslice]

where are the comments

[Rent Controlled]

We've seen this second wave coming for quite some time. I frequently get asked when I'm going to purchase (which eventually I will do) but I simply smile and say I'm in no hurry.

[RH]

This whole forclosure issue is so emblimatic of California as a whole. People living in la-la land thinking they are special and have no restrictions on their behavior. Wrong! Now that you are feeling the effects of your warped sense of personal responsibility( really the lack of it), you are crying the blues and want those who were more responsible and frugal to pick up the tab. Listen carefully and you just may hear the soft chords of violin music. That would be the sound of those who really care about your self induced predicament.

[Jovo]

This has been building for a while. The perfect storm. Falling prices, rising unemployment (less income tax & higher burden on state (unemployment)), and growing inventory.

The solution is obvious, but it's painful and will take time. If you can't pay, you're outta there. Sorry. Let the home prices fall sothat hard-working folks who can & will pay their mortgages/taxes occupy these homes. I know, it's crazy, isn't it?!?!? Encourage home ownership by responsible people!??!?!

Then the gubmint will at least see more real estate tax coming in (Collecting *all* the annual tax on a $700K home is better than collecting 0% of the tax on a $1.2M home. It isn't a $1.2M home, it should have never been, it's a $700K home in search of a good owner, not a 32-year old "media consultant" who put 0% down and used the home like an ATM.)

The solution: LET THE MARKET WORK. FORECLOSURE WORKS FOR A REASON. INSTEAD OF DELAYING FORECLOSURES, WE SHOULD **ACCLELERATE** THEM.

Get responsible homeowners into homes, and get rid of the squatters.

[DT]

Although it's never good when someone loses their home, eventually it will be the best for everyone when home prices finally fall to historical norms.

[Latesummer2009]

Next foreclosure wave lands in December. Panic begins in September, as selling season ends and defaults loom. Even on the Westside.

www.westsideremeltdown.blogspot.com

[esp4p3]

I think all the "shadow inventory" everyone here talks about is what the banks have been holding. Thanks to Obama's plan to refinance it has slowed the housing market to a crawl. This can't go on forever.

This will bring about another 10-15% drop in LA housing prices at least. It will be as severe as the last wave unlike what the guy in the article says.

[Prof Watson]

Unfortunately, California has become a failed state. Time to move to Texas.

[larealtyreport]

the sign touting "Free bus tours of foreclosed properties" is scary. What is particularly interesting about this sign, is it typifies speculative behavior associated with market tops, such as the dot com bubble in the stock market, i.e. when everybody knows about it, it can't be a good thing anymore, right?

[Squanto McGee]

Why get worried about a foreclosure? Just walk away and rent until the prices come down. So what if your credit is blemished. Everyone elses credit looks like crap too and you can fix it over the next two years while saving a ton of money as a renter. The banks made obscene profits during the good times. Let them eat s...t for the next two years.

[Arti]

NO Obama and the government will NOT let this happen. They will use another $1 Trillion to subsidize banks and mortgage companies to forgive parts of our loans and buy us lower rates.

You are all thinking selfish. I bought home for $650,000, it went up to $850,000! I paid interest only. So I took money out HELOC and I bought many nice things and start business.

But now that money is gone, AND the bank is sending me a month payment that is much higher (they want interest!) AND they are saying I cant refi because my home is not even worth the old $650,000. This is robbery I should not have to pay any of this. The government will help me I read that you can now be underwater 25% and still get government moneys and taxes. Stop thinking selfish I have to get the money it is good for your economy.

[SB]

TO RH: re: comment about California. You can't generalize about an entire state/people like that. Your comments are invalid, criticising is always so easy...

[JayC]

What's interesting is that this is news. Credit Suisse published the damning chart a year ago documenting how a second massive wave of ARM resets was coming in late 09 and lasting through 2011/12. It was even featured in 60 Minutes. These enormous mortgage resets are on a predetermined reset schedule, so seeing they're coming doesn't require a crystal ball or insider knowledge.

Why are people so surprised that a second massive wave is coming? You almost have to be looking the other way not to see it.

[SMRR]

Yeah. My wife keeps getting asked when we are going to buy by our friends with $850K 3/2/s in Koreatown/Hancock Park Adjacent/Los Feliz/Siler Lake...

When the cows come home.

[JohnnyB1]

Will there be bus tours like this when the next wave of foreclosures hits the Westside ?

[fezco]

Arti,
Is your story real, my friend? Are we selfish for playing by the rules and actually paying our debts, my friend?

[swinla]

This isn't a surprise... here is a chart of mortgages types and when they are resetting. This is going to go on for quite some time...

http://patrick.net/housing/contrib/resets.png

[James]

I was looking for a house, but I stooped. I couldn't belive how few properties were coming to market and the crazy prices people are still willing to pay. In China they save 40% of their income. I'm going to try to do the same here. I think the Chinese have the right economy, we have corporate welfare. How bad did Clinton-Bush screw us.

[costa rica condos]

We all go thorough stressful experiences in our lives and the stress of buying a house is a no lesser experience. First, there is the stress of finding the right real estate agent you can trust, find the home that you feel is just right for you, negotiating the sale, and finally arranging the move

[someday the ants will eat the grasshoppers]

Arti,

Good to hear from you, pal. It's been a while. We're still renting, too. Maybe another year? Then the feast will begin.

Someday

[Lake Travis Condos]

It is really fact now a day Real Estate Marketing growing after information technology, every investors want to move in real estate sector Major factors that are responsible for bringing about this change include,