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Homeowner default notices jump 123%
County foreclosures surge, information service says
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California's slow housing market turned down a bleak path during the first quarter as thousands of homeowners fell months behind in their mortgage payments, leading to a surge of default notices.
Lending institutions filed 46,760 defaults, the most in almost 10 years. The news was coupled by a wave of foreclosures statewide.
In Ventura County, notices of default on houses and condominiums jumped to 965 in the first quarter, up 123 percent from 433 in the same period last year, DataQuick Information Systems reported Monday.
The La Jolla-based real estate information service blamed the increase on flat appreciation, slow sales and the terms of teaser-rate mortgages being reset at a higher interest rate.
The number of default notices sent to California homeowners last quarter increased to 46,760 for the January-to-March period, up 148 percent from 18,856 last year. The notices serve as the first step in a lengthy process toward foreclosure.
In recent years while the market was hot, Ventura County homeowners were largely able to avoid foreclosure by selling their homes, paying off their mortgages and still making a profit. That no longer seems to be the case for some people.
There were 203 foreclosures in Ventura County during the first quarter, up from 17 filed over the same period last year, which was considered a "rock bottom level," said DataQuick spokesman Andrew LePage. The year-over-year leap was a drastic 1,094 percent.
'A perfect storm is brewing'
Since 1988, Ventura County's quarterly average has been 124 foreclosures. Foreclosures peaked at 330 during the third quarter of 1996, and hit an all-time low of six in the third quarter of 2004, LePage said.
Statewide, the loss of homes to foreclosure totaled 11,033 during the first quarter, up 81.5 percent from 6,078 for the previous quarter and 802.1 percent from 1,223 for the first quarter last year.
DataQuick reported that many of the loans that went into default last quarter were originated between April 2005 and May 2006, with a median age of 15 months. Adjustable-rate mortgage use for primary purchase home loans peaked at 77.8 percent in May 2005 but has dropped since.
On primary mortgages, homeowners were a median five months behind on their payments when the lenders started the default processes. The borrowers owed a median $10,784 on a median $331,200 mortgage.
Mortgage broker Mike Anderson is seeing a noticeable increase in foreclosures and is forecasting a major jump soon.
"A perfect storm is brewing, and most people don't even know it," said Anderson, a partner of Ventura County Home Loans in Ventura. "A lot of people are on the cusp of looking at foreclosure."
Some borrowers might not be fully informed or aware of their types of loans, one of which could be an adjustable rate mortgage that is about to increase.
A very different climate
What's driving the increase of foreclosures? Some experts say they don't know. Anderson says the changing of subprime guidelines and the terms of many adjustable rate mortgages increasing are some of the factors.
"More than likely, a large portion of these are going to be foreclosed on. That's when there's going to be blood on the streets, hypothetically," Anderson said. "As early as six months ago, you could do 100 percent financing for the stated borrower with a 600 credit (FICO) score."
It's a different story today. With subprime banks defaulting on these payments and sometimes filing bankruptcy, lenders are cautiously requiring a minimum credit score of 670, and a down payment on the property. This makes it nearly impossible to refinance for a homeowner whose property lost value, and now has more to pay the bank than what was originally owed.
"The market is having a long overdue correction in terms of saying yes to loans," Anderson said.
Many worry the current housing cycle will replicate the housing market's crash in the 1990s, but it's a very different climate, said Bill Watkins, director of the UC Santa Barbara Economic Forecast Project.
"Right now, the economy is doing rather well," Watkins said. "The people who are losing their homes are not typically people who have lost their jobs, but because they've had to deal with the structure of the loan" and don't have enough equity to sell or refinance.
For some, the best option could be to sell, but if the homeowner does not have any equity or savings, the most rational and easy choice could be to simply walk away, and let the house go to the bank, Watkins said.
Buyers hoping to get a good deal on foreclosed homes will likely be disappointed. Home values have not yet been effected by rising defaults, Watkins said.
'Still a lot of demand'
Mark Asai, a real estate foreclosure consultant at Century 21 Rolling Oaks in Thousand Oaks, said a buyer might save from 3 percent to 5 percent off a foreclosed home, but that's it.
"The quantity of foreclosures are very small, and we're in a more affluent area where there's still a lot of demand and not much housing relative to people who want to buy a home," Asai said.
In response to the rising default notices in Ventura County, this month Troop Real Estate Inc. formed Troop Solutions, a subsidiary corporation to assist homeowners who are approaching or are in preforeclosure. Preforeclosure is the period of time before a property goes to public sale.
"What we try to do is identify the rights and obligations of the homeowners and develop strategies and solutions that help them keep their property," said Paul E. Stansen, real estate broker and attorney leading the efforts at Troop Solutions. "In a nutshell, we work to protect homeowners' equity and credit."
STORY TOOLS 
More from County NewsHe has a large and growing list of potential clients. Receiving counseling isn't cheap. Stansen charges $250 an hour while he sifts through loan documents with a client and tries to find a possible solution, such as a mortgage modification, which might mean extending the term of the loan.
It typically takes from two to three hours to get through the conversation and analyze a 200- to 300-page loan document.
"What we're trying to find out is what's unique about their loan, if there's a prepayment penalty, if there's a rate adjustment, and what they can do to rectify that," Stansen said.
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Posted by andylev on April 17, 2007 at 6:16 a.m. (Suggest removal)
George Bush has been talking down the economy for six years and it seems to be working...he installed Bernanke has head of the Federal Reserve Board to raise interests rates, combine that with Bush's encouragement to Mexico's people to come on up and take Americans' jobs and send billions out of the country back to Mexico...
Bush has been trying to "cool" off the economy for years...
Bush is winning one War, the war to break the backs of the American middle class...and Washington and Wall Street insders can make good money out of a collapsing economy...they know how, they make the rules and set the interest ratess
Posted by gboswell on April 17, 2007 at 7:33 a.m. (Suggest removal)
Jeeze does EVERYTHING have to be about Bush?
Posted by fensterlips on April 17, 2007 at 8:10 a.m. (Suggest removal)
OK, Andylev has a blind hatred for George Bush. That's his choice but has no place in a comment on this article.
Posted by ecarson1958 on April 17, 2007 at 9:25 a.m. (Suggest removal)
The question was 'What's driving the increase in foreclosures?' Some experts say they don't know. Experts? Who are those people? If they don't know, then how can they be referred to as experts? Strange. Watkins says that the economy is doing rather well. It is? By who's standards and what part of the economy? When the price of gas is pushing $4 a gallon and more than likely $5 by next summer, the increase of the price of transporting food to the grocery stores causes a hugh increase in the price there. Some people drive 3 to 4 hundred miles a week for work. That adds up. Instead of listening to the media and government, ask people all across Southern California about how well the economy is doing. Most people are a paycheck away from bankruptcy. In 2006, 800 Billion in interest loans had to be refinanced. In 2007 that figure jumps to 1.3 Trillion. TRILLION. Guess what? This is only the tip of the ice berg. That means that only 10% of what we see, read and hear about is on top of 90% of what we don't know. Don't listen to anybody that sells homes and lends money. You will never hear the truth. Realtors spin more tales and twist numbers better than anyone. It is only after it's too late that they'll say they couldn't have imagined what had happened to the Real Estate Market.
Posted by tuma on April 17, 2007 at 10:02 a.m. (Suggest removal)
..and now the "smart" people want to dream up more kinky schemes to bail people out. I wonder what these people are thinking. Housing in the last 4 yrs has been out of sync with fundamentals and until the market is allowed to reset those fundamentals, the problem is only being postponed. Nationally, one can say there is some 20-40% worth of air in home values...and any intervention now would only prop up artificiality...and postpone the day of reckoning. Some parts of the nation saw home values practically double in 2-4 yrs. Anyone with a oita of brain cells must have realised there was something weird going on. homes values are generally in lock-step with population growth, wages growth but these indicators barely burged....
http://biz.yahoo.com/ap/070416/risky_...
Posted by tobroker on April 17, 2007 at 11:16 a.m. (Suggest removal)
If I were buying a home in Thousand Oaks two years ago, I would be clamoring among others in a multiple-bid situation above the listed price. I don't see this kind of thing anymore. Open houses are rather silent these days...
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As we enter the silent spring of the 2007 market, I see 2 types of behavior:
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1. Those attempting to leverage the equity in the homes they have owned for more than 3 years attempting to buy up in what they perceive is a value market tilted towards buyers. This is especially so with higher-end homes.
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2. Those attempting to enter the market have suddenly come to experience the gravity of the realization that what goes up must also fall, in due course. These are folks at the lower end of the market.
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Thousand Oaks is a fairly affluent area. However, in my own neighborhood, of the dozen or so homes that have appeared on the market in April, two are short sales, and two are bank-owned. In my experience, this is rather different, not merely from these last immediate boom times, but going further back too.
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Realtors and Brokers are quickly coming to understand that our marketplace has changed, and that this portion of the cycle might be quite prolonged. There is always money to be made in this business, but it will go to those who are brave enough to dive below the falling curve, to emerge for a breath and repeat again. Past days of easy takings are gone. Its time to invest and work at it.
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Posted by tdskid2002 on April 17, 2007 at 11:57 a.m. (Suggest removal)
Since when were Realtors qualified to analyze markets and evaluate key economic indicators to justify you buying a house and all but fully assuring you that the housing market will just keep floating up and away?
Most were and ARE in it for the quick buck and just about the only financial/economic background and capabilities they have are to calculate the 5% commission they're going to make on the sale of a $500,000 shack in Colonia.
Shame on those who abused their position when people trusted them with their dreams of owning a home. What goes around will someday come around.
I think Realtors had more to do with this problem than Mortgage Brokers in that Realtors were as bold as going DOOR TO DOOR in Oxnard saying: "I can sell your home and get you in a newer home that's worth twice as much and will cost you half as much per month, and believe me, with this market, the sky's the limit on these new homes!" (That was exactly what the "REALTOR" said to us.)
Posted by tobroker on April 17, 2007 at 2:38 p.m. (Suggest removal)
I can empathize with your comment about the recent manic upselling by realtors.
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Unfortunately, some of my colleagues will have the hardest time adjusting to their tap being turned off. Buyers at the low end are either waiting on the sidelines, or have already been turned down for a loan, and have to adjust to new, lower expectations.
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Participants in the food chain must learn to survive under new rules. Educate your clients about the realities of a static or falling marketplace. They aren't used to it, but riding the curve of home prices down is the biggest mistake they will make. It'll also cost you your livelihood. Become more competitive, reduce your coops, increase your internet presence (learn how to put up a website on your property), walk the neighborhoods for those incipient renters. Let fairness rule, and that may mean offering a discount to a buyer to secure a sale.
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The boom is over. Time to get down to work. Real estate should be all about housing again, and not about investment, or worse, speculation.
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Posted by sjbonehead50 on April 17, 2007 at 5:04 p.m. (Suggest removal)
These poor people are close to losing their homes and Mr. Stansen @ Troop wants to bilk them out of $250 an hour. Are you kidding me!!!???
Posted by dorf on April 17, 2007 at 8:01 p.m. (Suggest removal)
California foreclosure data taken from
Foreclosure.com:
Sept '06 - 3,000
Feb '07 - 10,000
Today (April 17th) - 24,655
With continued exponential growth, we should see 35K foreclosures by June and 50K by August. It gets really nasty after that. Think early 90's. Not to mention massive REIC layoffs, mortgage resets, mortgage fraud crackdown, subprime/Alt-A meltdown, stricter lending guidelines, diminished sales and massive inventory. Oh, I almost forgot the most important variable... public sentiment.
To those who think Thousand Oaks is special and unaffected by market forces, try to explain that to those people Countrywide recently canned.
By the way, here's a link to what's in store for the next few years...
http://www.autodogmatic.com/forum/vie...
Posted by shaver_one on April 18, 2007 at 1:54 p.m. (Suggest removal)
The main problem is the over-the-top prices people are asking for these homes. Back in the day, you could buy a four bedroom, two bath house for under $70.000. Now, it's $7,000,000. Give me a break.
The median annual US household income is $52,000. In Ventura County, an annual income of $51,500 means you are low income. And to add to the misery, sellers and builders consider $600,000 to be "affordable housing for the low income buyer". WHAT?
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