Another Increase in California Foreclosure Activity

July 22, 2008

La Jolla, CA.--Lenders started foreclosure proceedings on a record number of California homeowners last quarter, the result of declining home values and the rampant spoilage of a batch of especially risky home loans made in late 2005 and 2006, a real estate information service reported.

Mortgage servicers recorded 121,341 "notices of default" during the April-through-June period. That was up 6.6 percent from a revised 113,809 for this year's first quarter, and up 124.9 percent from 53,943 in second-quarter 2007, according to DataQuick Information Systems.

Last quarter's number of defaults was the highest in DataQuick's statistics, which go back to 1992.

"It's still very clear that most of the problems are in certain areas and in certain categories. Basically, areas that absorbed spillover activity during the end of the boom cycle in 2006 seem to be the hardest hit. Prices went too high, fueled by the availability of easy-to-get dicey home loans. An added element was speculative buying," said John Walsh, DataQuick president.

"The small increase in defaults from the first to the second quarter may indicate that we're nearing a plateau. We won't know until the end of the year, but it may be that some lenders are starting to prioritize workouts with homeowners instead of grinding things through the foreclosure process. Of course, they may just be swamped and can't handle processing any more paperwork," he said.

Most of the loans that went into default last quarter were originated between September 2005 and November 2006. The median age was 26 months, up from 16 months a year earlier.

On primary mortgages, California homeowners were a median five months behind on their payments when the lender filed the notice of default. The borrowers owed a median $11,583 on a median $346,400 mortgage.

On home equity loans and lines of credit, homeowners were a median eight months behind on their payments. Borrowers owed a median $3,492 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.

DataQuick, a subsidiary of Vancouver-based MacDonald Dettwiler and Associates, monitors real estate activity nationwide and provides information to consumers, educational institutions, public agencies, lending institutions, title companies and industry analysts. Notices of Default are recorded at county recorders offices and mark the first step of the formal foreclosure process.

Although 121,341 default notices were filed last quarter, they involved 118,020 homes because some borrowers were in default on multiple loans (e.g. a primary mortgage and a line of credit).

Last quarter's default numbers were a record in almost all of the state's 58 counties. That included Los Angeles County, where last quarter's 21,632 residential defaults surpassed the prior record of 21,444 recorded during first-quarter 1996.

On a loan-by-loan basis, mortgages were least likely to go into default in San Francisco, Marin, and San Mateo counties - an historical norm. The likelihood was highest in Merced, San Joaquin and Stanislaus counties.

Of the homeowners in default, an estimated 22 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. The increased portion of homes lost to foreclosure reflects the slow real estate market, as well as the number of homes bought during the height of the market with multiple-loan financing, which makes 'work- outs' difficult.

Multiple-loan financing peaked in Q4 of 2006 at 60.9 percent of all financed home purchases. Last quarter it was 11.5 percent.

Trustees Deeds recorded, or the actual loss of a home to foreclosure, totaled 63,061 during the second quarter. That's the highest since DataQuick began tracking Trustees Deeds in 1988. Last quarter's total rose 33.5 percent from 47,221 in the previous quarter, and jumped 261.0 percent from 17,458 in second quarter 2007. In the last real estate cycle, Trustees Deeds peaked at 15,418 in third-quarter 1996. The all- time low was 637 in the second quarter of 2005.

There are 8.4 million houses and condos in the state, DataQuick reported.

Foreclosure resales have emerged as a significant market factor, accounting for 40.0 percent of all California resale activity last quarter. A year ago it was 5.4 percent. Foreclosure resales vary significantly by area, from 3.0 percent in San Francisco County to 75.1 percent in Merced County.

Notices of Default
houses and condos

County/Region	2007Q2	2008Q2	Yr/Yr%

Los Angeles	10,393	21,632	108.1%
Orange	2,984	7,348	146.2%
San Diego	4,383	9,519	117.2%
Riverside	6,648	14,974	125.2%
San Bernardino	5,141	11,817	129.9%
Ventura	1,059	2,303	117.5%
Imperial	220	635	188.6%
Socal	30,828	68,228	121.3%

San Francisco	257	418	62.6%
Alameda	1,612	3,812	136.5%
Contra Costa	2,316	5,046	117.9%
Santa Clara	1,275	3,751	194.2%
San Mateo	463	1,066	130.2%
Marin	118	284	140.7%
Solano	1,065	2,427	127.9%
Sonoma	462	1,376	197.8%
Napa	128	336	162.5%
Bay Area	7,696	18,516	140.6%

Santa Cruz	155	531	242.6%
Santa Barbara	434	922	112.4%
San Luis Obispo	208	499	139.9%
Monterey	483	1,688	249.5%
Coast	1,280	3,640	184.4%

Sacramento	3,840	7,325	90.8%
San Joaquin	1,983	4,795	141.8%
Placer	627	1,122	78.9%
Kern	1,593	3,459	117.1%
Fresno	1,380	2,821	104.4%
Madera	215	555	158.1%
Merced	642	1,936	201.6%
Tulare	428	1,099	156.8%
Yolo	232	548	136.2%
El Dorado	222	442	99.1%
Stanislaus	1,286	3,464	169.4%
Kings	75	188	150.7%
San Benito	122	290	137.7%
Yuba	171	373	118.1%
Colusa	39	92	135.9%
Sutter	109	374	243.1%
Central Valley	12,964	28,883	122.8%

Mountains*	328	662	101.8%

North Calif*	847	1,412	66.7%

Statewide*	53,943	121,341	124.9%

* includes additional counties

Trustees Deeds Recorded
houses and condos

County/Region	2007Q2	2008Q2	Yr/Yr%

Los Angeles	2,581	9,609	272.3%
Orange	821	3,085	275.8%
San Diego	1,714	4,807	180.5%
Riverside	2,517	8,814	250.2%
San Bernardino	1,505	6,251	315.3%
Ventura	316	1,123	255.4%
Imperial	74	305	312.2%
Socal	9,528	33,994	256.8%

San Francisco	50	141	182.0%
Alameda	497	1,709	243.9%
Contra Costa	777	2,965	281.6%
Santa Clara	255	1,560	511.8%
San Mateo	97	347	257.7%
Marin	25	128	412.0%
Solano	324	1,406	334.0%
Sonoma	163	788	383.4%
Napa	34	162	376.5%
Bay Area	2,222	9,206	314.3%

Santa Cruz	46	232	404.3%
Santa Barbara	137	443	223.4%
San Luis Obispo	55	177	221.8%
Monterey	156	847	442.9%
Coast	394	1,699	331.2%

Sacramento	1,662	4,475	169.3%
San Joaquin	792	3,185	302.1%
Placer	220	572	160.0%
Kern	533	2,048	284.2%
Fresno	402	1,412	251.2%
Madera	55	311	465.5%
Merced	243	1,223	403.3%
Tulare	142	519	265.5%
Yolo	103	293	184.5%
El Dorado	89	196	120.2%
Stanislaus	522	2,207	322.8%
Kings	27	65	140.7%
San Benito	38	166	336.8%
Yuba	84	224	166.7%
Colusa	9	58	544.4%
Sutter	57	202	254.4%
Central Valley	4,978	17,156	244.6%

Mountains*	90	300	233.3%

North Calif*	246	676	174.8%

Statewide	17,458	63,031	261.0%