Steep increase in California foreclosure activity

LA JOLLA
October 19, 2006 7:08am

Foreclosure actions in California were up sharply in the third quarter, with the Central Valley outpacing the state as a whole, according to figures compiled by DataQuick Information Services.

There were 6,017 foreclosures in the ten counties DataQuick used for its Central Valley numbers. The total was up 148 percent from the third quarter last year, when a total of 2,417 actions were filed.

Placer County at 203.4 percent had the highest percentage increase, according to DataQuick. There were 443 foreclosure actions in the county in the most recent quarter.

Madera, with 104 homes going into foreclosure, had the lowest increase at 89.1 percent.

The other eight counties measured by DataQuick:

• Sacramento, up 99.1 percent, with 1,388 foreclosures;

• San Joaquin, up 178 percent, with 898 foreclosures;

• Kern, up 105.3 percent with 741 foreclosures;

• Merced, up 113.6 percent with 282 foreclosures;

• Tulare, up 129.1 percent with 268 foreclosures;

• Yolo, up 110.4 percent with 101 foreclosures, and,

• El Dorado, up 166.7 percent with 120 foreclosures.

Statewide, residential foreclosure activity surged to its highest level in more than four years last quarter, the result of slower home sales and flattening prices.

Lending institutions sent 26,705 default notices to homeowners in the state during the three-month period ending in September. That was up 28.3 percent from 20,812 for the prior quarter, and up 111.8 percent from 12,606 for 2005's third quarter, according to DataQuick Information Systems.

Last quarter's number was the highest since first-quarter 2002 when 30,225 default notices were sent out. Foreclosure activity hit a low during the third quarter of 2004 when 12,145 default notices were recorded. Defaults peaked in first quarter 1996 at 59,897. DataQuick's default statistics go back to 1992. The quarterly average is 32,653.

"Foreclosures happen when people owe more on their property that the property is worth. When prices are going up fast, as they were last year and the year before, the number of homeowners in that situation steadily declines. When prices are flat, or going down, fewer homeowners in financial distress are able to use their homes to bail themselves out of trouble," says Marshall Prentice, DataQuick's president.

Statewide, the annual rate of home price increases hit a high of 22.8 percent during the second quarter of 2004. Since then, price appreciation has cooled, to 3.7 percent last quarter.

“Notices of Default” are filed at county recorders’ offices and mark the first step of the formal foreclosure process.

The median age of the home loans that went into default last quarter was 14 months, and more than half were originated in 2005.

On primary mortgages, homeowners were a median of five months behind on their payments when the lender started the default process. The borrowers owed a median $9,829 on a median $306,000 mortgage.

On lines of credit, homeowners were a median six months behind on their payments. Borrowers owed a median $3,200 on a median $60,000 credit line. However the amount of the credit line that was actually in use cannot be determined from public records.

On a loan-by-loan basis, mortgages were least likely to go into default in Marin, Napa and San Francisco counties. The likelihood was highest in Fresno, Merced and Riverside counties. Historically, the percentage of mortgages in default has been higher in lower-cost inland markets, DataQuick reported.

Most homeowners emerge from the foreclosure process by bringing their payments current, refinancing, or selling the home and paying off what they owe. Still, about 19 percent of homeowners who found themselves in default earlier in the year actually lost their homes to foreclosure in the third quarter. A year ago it was six percent.

Trustees deeds recorded on homes totaled 3,424 during the third quarter, up 76.9 percent from 1,936 for the previous quarter, and up 362.1 percent from 741 for last year's third quarter. Trustees deeds, or actual foreclosure sales, peaked at 14,896 in second-quarter 1997, and hit a low of 636 in the second quarter of last year.

There are 7.81 million houses and condos in the state.

While foreclosure properties tugged property values down by almost 10 percent in some areas nine years ago, the effect on today's market is negligible, DataQuick reported.

DataQuick is a subsidiary of Vancouver, B.C.-based MacDonald Dettwiler and Associates.