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Havasu_Dreamin
10-19-2006, 09:11 AM
Reprinted without the permission of the LA Times
More Homeowners Going Into Default
A housing market slowdown combined with rising payments on adjustable-rate loans is leading to a sharp hike in notices from lenders.
By David Streitfeld and Martin Zimmerman
Times Staff Writers
October 19, 2006
The number of Californians who are significantly behind on their mortgage payments and at risk of losing their homes to foreclosure more than doubled in the three months ended Sept. 30, providing the latest evidence of trouble in the housing market, figures released Wednesday show.
Lenders sent out 26,705 default notices — the first step toward a foreclosure — during the July-to-September period, up from 12,606 during the same quarter in 2005, according to DataQuick Information Systems.
Defaults are still well below their peak level of 59,897, which came in the first three months of 1996, as the state's last housing slowdown was ending. But the report shows that the slumping housing market is taking a toll on more homeowners — especially those with mortgages that offer low initial payments at the cost of higher bills down the road.
"We were putting buyers in homes with loans they could not afford to sustain over the long haul," said Bob Casagrand, a San Diego real estate agent. "If you're a marginal buyer with an adjustable mortgage, you're rolling the dice on the future."
Foreclosures are rare when the housing market is strong and prices are rising. In those conditions, borrowers can usually sell their homes quickly, or they have enough equity to allow them to refinance their loans. But in another disquieting sign, DataQuick reported that 19% of the owners who went into default earlier in the year actually lost their homes to foreclosure in the third quarter, more than triple the 6% in 2005.
Mortgage payments are such a big part of the household budget for many Californians that it takes only a little trouble to fall behind. For Stacey and Mike Broussard, all it took was an exceptionally rainy spring.
That meant Mike Broussard was laid off from his job as a heavy equipment operator.
"I tried to juggle things around — we were eating a lot of peanut butter and a lot of beans — but it got out of control," said Stacey Broussard, 39.
She was in charge of the bills and each month would pay what she could of the $1,300 the lender expected for the mortgage on their home northeast of San Francisco in Antioch.
At the end of August, she said, she tried to make another partial payment, but the lender said anything less than a full payment would lead to a default.
One day her husband said she had a notice from the post office to pick up a special letter. She knew what it was, but he didn't. "I was trying to fix it before I told him," she said. "That was the worst moment."
Mike Broussard is now employed again, and the couple — who are lucky enough to have equity in their home — are working with TerraCotta Group, a Manhattan Beach real estate and mortgage company that specializes in helping delinquent homeowners get out of default.
When she started TerraCotta 2 1/2 years ago, company President Tingting Zhang said two or three people would come through her door on the typical day looking for help. Now, it's 30 to 40. "And we haven't reached the peak yet," said Zhang, who believes that the combination of rising interest rates and high-risk mortgages could spell defeat for a rising number of borrowers.
Just Wednesday morning, Zhang dealt with a Lancaster resident who had taken out a $310,000 adjustable-rate mortgage with a starter interest rate of 5.4% and a monthly payment of $1,050.
In July, the interest rate climbed to 8.5% and the monthly payment jumped to $2,306. A year-end adjustment will send the monthly payment to $2,744.
"The borrower is totally unprepared for this rate adjustment," Zhang said.
The fallout is starting to show up in the workload at credit counseling outfits.
Gary Aguilar, counseling manager for Springboard, a nonprofit credit counseling agency in Riverside, said the amount of mortgage-related work he and his staff were doing had "pretty much tripled this year."
The softening of the housing market was the trigger, as new homeowners with little or no equity in their properties found themselves unable to sell at a high enough price to pay off the balance of the loan and still cover all of the sale expenses.
"Whereas a year ago, people could have put their house on the market and sold their way out of the problem, now they're stuck with the house," said Richard Pittman, housing services coordinator for credit counselor ByDesign Financial Solutions in Los Angeles.
"I've talked to two in the last week who thought they had a done deal, and when it came to putting the loan together, they came up short" and their house went to auction, he said.
More than half of the loans that went into default in the third quarter were made last year, DataQuick said. The homeowners were a median of five months behind on their payments when they entered the foreclosure process, meaning half were more than five months behind and half were less. The median delinquent debt was $9,829 on a $306,000 mortgage.
The housing market in San Diego County peaked earlier than the rest of California, so it's not surprising that default notices rose particularly quickly there. They climbed 160% in the quarter, more than twice the pace in Los Angeles County.
"In the vast majority of cases, the default notices are falling disproportionately on the entry-level market," said John Hokkanen, a San Diego agent. "These are people who don't have any reserves in a time of crisis."
Foreclosures also can weaken housing values further as lenders put the foreclosed homes on the market, often at reduced prices in hopes of a quick sale.
But although experts believe the default and foreclosure numbers will continue to grow, few see them accompanying a painful housing collapse as occurred in the early 1990s.
"I don't think it's time to panic," said Christopher Cagan, an analyst with First American Real Estate Solutions in Santa Ana. "People have gotten so used to sellers able to command whatever they want on whatever terms they want. That's no longer the case. This is a natural turning of the business cycle."
DataQuick analyst John Karevoll concurred: "We're still seeing foreclosure activity below an average of the last 19 years. I'm not convinced the numbers are going to continue going up at this rate, unless something major happens to the economy."
One hopeful factor is that the state's economy is much stronger and more diversified than it was 15 years ago, when the aerospace industry was downsizing with the end of the Cold War.
In addition, there hasn't been a repeat of the 1980s building boom, which created an oversupply of homes and helped fuel the downward spiral in housing prices in the 1990s.
"Historically, we're in a different place than we were then," said economist Christopher Thornberg, who watched the '90s slump unfold as a graduate student at UCLA and now has a consulting firm. On the downside, he noted, "we have never seen a run-up in housing prices like this and we've never seen these kinds of mortgages."
Zhang agreed: "Back then, you put 20% down and got a 30-year fixed-rate loan. Now, we have a lot of people who got mortgages when they really shouldn't have qualified."
*
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Foreclosure threat
Number of mortgage default notices sent by lenders to California homeowners in the third quarters, by county and overall
County 2005 2006 % change
Ventura 222 578 +160.4%
San Diego 906 2,355 +159.9
Riverside 1,266 3,040 +140.1
Orange 743 1,500 +101.9
San Bernardino 1,269 2,548 +100.8
Los Angeles 3,233 5,565 +72.1
Southern California* 7,654 15,676 +104.8%
Statewide 12,606 26,705 +111.8
*Includes Imperial County
Source: DataQuick Information Systems

wsuwrhr
10-19-2006, 09:13 AM
I keep hearing it, but I don't see it as I am trying to buy one and can't find a thing.
Brian

FREIND OF AA AND TA
10-19-2006, 09:23 AM
I have been through this before. The banks that I work with are letting the people stay in the house and are doing strange work out programs. Why you ask??? The bank's REO departments are too small or almost non existant. They are hiring and training people as we speak. You will see, in the next few months REO homes will be on the market all fixed up with new everything and I hear the financing with a lot of good banks will be amazing!!!! 100% financing with 640+ ficos. The bank will pay the closing costs and the loans will be interest only for 10 years!!!!! No prepay. There will be many variations of course but similar loans. I also just heard of a 40 year loan (no down) fully amoritized!!!!!! Sweeeet!!! I wish I could say what bank it is!!!

RitcheyRch
10-19-2006, 09:25 AM
I thought most banks were now offering 40 year loans.

FREIND OF AA AND TA
10-19-2006, 09:29 AM
I thought most banks were now offering 40 year loans.
Usualy not 100% financing with crapy credit.

HM
10-19-2006, 09:35 AM
I keep hearing it, but I don't see it as I am trying to buy one and can't find a thing.
Brian
You don't know where to look. When a homeowner gets a NOD recorded (Notice of Default), the vultures swoop in - on all the ones with equity. You can go onto the county recorder's website and search for these.
And, it does not take a rocket scientist to figure out when you have record high number of home owners that you will soon see a record number of foreclosures - regardless of the market.

RitcheyRch
10-19-2006, 09:36 AM
Oh ok, thanks for the info.
Usualy not 100% financing with crapy credit.

reDECKulous
10-19-2006, 09:48 AM
100% financing down to a 580 FICO all day long... 40 and 50 year terms have been out for years...

FREIND OF AA AND TA
10-19-2006, 09:56 AM
100% financing down to a 580 FICO all day long... 40 and 50 year terms have been out for years...
I am talking about a paper rates, bank pays all costs, one loan, all with a 40 year term. That is way different!!!!!

Kilrtoy
10-19-2006, 10:01 AM
When do defaults start at 4 months 6 months...

FREIND OF AA AND TA
10-19-2006, 10:03 AM
When do defaults start at 4 months 6 months...
Whenever they get around to it but usually 3 mos.

Kilrtoy
10-19-2006, 10:05 AM
Whenever they get around to it but usually 3 mos.
Quicker than I thought.

mbrown2
10-19-2006, 10:30 AM
I am talking about a paper rates, bank pays all costs, one loan, all with a 40 year term. That is way different!!!!!
You are right....banks are thinking of creative programs to get these folks into....they are not going to let all this crap go to hell and a handbasket....in 6 months there will be a lot of transition programs for folks in the toilet.

CARLSON-JET
10-19-2006, 10:47 AM
You are right....banks are thinking of creative programs to get these folks into....they are not going to let all this crap go to hell and a handbasket....in 6 months there will be a lot of transition programs for folks in the toilet.
As it should be. Taxpayers are getting tired of bailing out the most profitable businesses out there. (Banks /lending institutions) The lenders created these conditions.. they should also sink or swim with them.. Funny how history keeps repeating itself.

Parker Dreamin
10-19-2006, 11:39 AM
cash is king

welk2party
10-19-2006, 11:49 AM
Is that the sky falling? :cry:

Doofus Here
10-19-2006, 12:02 PM
There's supposed to be something on the order of $4 TRILLION dollars of the "creative" loans coming to the roll-over point in the next 2 to 4 years. There will be a lot of defaults when that happens should the interest rate climb much beyond the present level. Neg-am's, Interest only - roll to VarInt, 1% loans - now I heard about the newest screwball package - the 1/4% loan. Geez...when will people learn to live within their means. Oh, yeah, I almost forgot...most of us big ballers with the fancy boats don't know that either! :) Just kidding........I know all of you MUST have paid cash and not raided your equity or have 20 year loans and such. :rollside:
Rufus

CARLSON-JET
10-19-2006, 12:10 PM
More like the ceiling. :)
I will say, the "cash is king" comment holds true.
This Feb I bought a property from a sheriff's sale. The closing is the 28th of this month. After all expenses we will have an easy 25% net gain. There will be plenty to be made off this dip if you are positioned correctly.

lewiville
10-19-2006, 12:52 PM
You don't know where to look. When a homeowner gets a NOD recorded (Notice of Default), the vultures swoop in - on all the ones with equity. You can go onto the county recorder's website and search for these.
And, it does not take a rocket scientist to figure out when you have record high number of home owners that you will soon see a record number of foreclosures - regardless of the market.
HM,
I want to know where I can find that site. Do you have the address? I m spreading my wings.

YeLLowBoaT
10-19-2006, 01:43 PM
Currently I am getting 3-5 calls a week from realtors/brockers for me to bid repainting the inside of repos. I even had one thru hot boat...There are tons of them out there. You just have to look.

lewiville
10-19-2006, 10:42 PM
HM did you come accross that site yet?

ROZ
10-19-2006, 11:44 PM
Currently I am getting 3-5 calls a week from realtors/brockers for me to bid repainting the inside of repos. I even had one thru hot boat...There are tons of them out there. You just have to look.
Just 3 to 5 ?....lol... :D
Not that it's a problem down here, but the banks are asking top dollar after they fixup the homes...

YeLLowBoaT
10-19-2006, 11:55 PM
Just 3 to 5 ?....lol... :D
Not that it's a problem down here, but the banks are asking top dollar after they fixup the homes...
Well you know when you tell them you are atleast a month out they don't tend to call back... that and some of the prices I have bid for them may have been a little high( about 50% or so)

C-2
10-20-2006, 08:49 AM
A quick bump to facilitate the misery.
ROLL CALL for all the guys who said it wasn't gonna happen.....let's hear your peachy spin and outlook now....
Man, everybody is gearing up bigtime.

Howie Feltersnatch
10-20-2006, 09:48 AM
Foreclosures jump to '80s level
Nearly 4,000 homes up for possible sale; gas prices, debt blamed
07:08 AM CDT on Friday, October 20, 2006
By BRENDAN M. CASE / The Dallas Morning News
Home foreclosure postings in the Dallas-Fort Worth area have surged to their highest level since the 1980s.
Nearly 4,000 homes in Dallas, Tarrant, Collin and Denton counties have been posted for possible sale in November, up 49 percent from the same period a year ago.
"It's high, much higher than normal," said George Roddy, president of Addison-based Foreclosure Listing Service, which compiled the data.
Fueling the foreclosures are interest rate hikes, rising living expenses and consumer debt, and aggressive lending practices.
Home foreclosure postings reached about 35,300 so far this year, increasing 20 percent over the same period a year ago. That figure has already surpassed the total for 2005, which was about 32,500.
Foreclosures typically have their roots in a family calamity, such as divorce, death or job loss. Making things worse this year, said Mr. Roddy, were high energy prices and ballooning credit card debt. Meanwhile, real wages have stagnated.
"If you look at gasoline charges up until a month ago, they were up to the moon," he said. "And obviously, there's the cost of electricity and the high credit card balances people are holding."
Another likely culprit: aggressive lending, in which mortgage companies sell homeowners products that might not be suitable in the long term.
Many homeowners appeared to be struggling with adjustable rate mortgages, which accounted for about a third of foreclosure postings this month, Mr. Roddy said. That category includes nontraditional mortgages that offer low payments the first few years, often followed by sharply increasing payments.
Many homeowners have been trading in such mortgages for traditional fixed-rate mortgages.
It's not the most worrisome performance ever for foreclosures in the Dallas area. In 1989, foreclosures in Dallas County reached as high as 2,000 a month in a smaller overall market, Mr. Roddy said. This month's figure for Dallas County was 1,886.
The latest rise in foreclosures has added to concern about the local real estate market, which has cooled in recent months. In September, local home sales dropped, the number of homes for sale increased, and prices declined slightly as homebuyers pulled back to see what would happen to the national housing market.
Still, there are also positive signs, said Craig Jarrell, president for the Dallas region at Pulaski Mortgage Co.
"Maybe it's the spike before things start getting better," he said of the foreclosure postings. "Gasoline prices are down, interest rates have stabilized, the economy's doing all right, the stock market is getting better.
"I think real estate is going to keep on trucking in the Dallas area."
As a consumer, the key is to make sure you're not biting off more than you can chew, said Gary Akright, president of Dallas-based Dominion Mortgage Corp.
"I don't like to see people get in their homes and then lose their homes," he said. "But I think a lot of times people need to take responsibility and know that they shouldn't be stretching. We have guidelines for a reason."
Not all homes posted for foreclosure are sold at auction. Homeowners are often able to work out arrangements with their lenders.
Foreclosures this month rose by 49 percent in Dallas County, 47 percent in Tarrant County, 65 percent in Collin County and 37 percent in Rockwall County.
About 80 percent of the properties posted for foreclosure are worth $200,000 or less, with an average value of about $115,500 for Dallas, Tarrant, Collin and Denton counties, Mr. Roddy said.
Still, a small portion of homes have values over $500,000.
"It's safe to say that all walks of life in the D-FW area are affected," he said

NashvilleBound
10-20-2006, 11:50 AM
You don't know where to look. When a homeowner gets a NOD recorded (Notice of Default), the vultures swoop in - on all the ones with equity.
I dont know if I like that as a nick name....guess its better than most of the rest that people call me ;) ;) ;)

HM
10-20-2006, 12:21 PM
I dont know if I like that as a nick name....guess its better than most of the rest that people call me ;) ;) ;)
Just trying to keep the competition out. If they think that there are major greedy professionals behind this, they won't even try. One of my guys does this in San Diego, and the home owner of a recent deal he was trying to put together called him names much more graphic than that, but still signed.

FREIND OF AA AND TA
10-20-2006, 01:08 PM
I dont know if I like that as a nick name....guess its better than most of the rest that people call me ;) ;) ;)
Hey dude! It was nice hangin with ya in Nashville!!! I will be back in December to hopfully snag that land I looked at with Randy, I will let you know.

ChumpChange
10-20-2006, 01:13 PM
Currently I am getting 3-5 calls a week from realtors/brockers for me to bid repainting the inside of repos. I even had one thru hot boat...There are tons of them out there. You just have to look.
How much you charge for painting? I'll be doing that tomorrow....unless you make spending money a good deal.

YeLLowBoaT
10-20-2006, 01:33 PM
How much you charge for painting? I'll be doing that tomorrow....unless you make spending money a good deal.
it all dpeneds on what you want. Ball park for the "average" house for a single color "nice" paint job 1800-2500. 3500 if you do the prep, 5k if you help more then moving your 500lb bed. :)