California Defaults Soar by 80%
Notices of default in the January-to-March period rose 80% percent from 75,230 for the prior quarter and were up 19% percent from the year-ago quarter, real estate information provider DataQuick Information Systems reported Wednesday. Lenders filed a record number of mortgage default notices -- 135,431 in total -- against California homeowners during the first three months of 2009 as the recession continues and as a temporary moratorium-related lull in foreclosure activity ceases. Q109 posted an all-time high for any quarter in DataQuick's statistics, which trace defaults back to 1992. "The nastiest batch of California home loans appears to have been made in mid- to late-2006 and the foreclosure process is working its way through those," says president John Walsh. "Back then different risk factors were getting piled on top of each other. Adjustable-rate mortgages can be good loans. So can low- down-payment loans, interest-only loans, stated-income loans, etc. But if you combine these elements into one loan, it's toxic." Last quarter's defaulted loans showed a median origination month of July 2006 -- only four months after the median origination month for Q108's defaulted loans, suggesting a period of "particularly lax" underwriting criteria, DataQuick said. The increasingly poor behavior of consecutive vintages is especially telling. Lenders so far filed notices of default on less than 1% of the 3.7m home loans originated in 2004, whereas lenders so far filed notices of default on 4.9% of the 3.7m vintage 2005 loans. Of the 3m loans originated in 2006, 8.5% have so far resulted in default. "A particularly toxic period appears to have been August through November 2006 which had more than a 9% default rate," DataQuick said. "Of the 2.1m loans made in 2007, it's 4.6% -- a percentage that's likely to rise significantly during the rest of this year." While most Q109 foreclosure activity affected affordable inland communities, DataQuick saw signs the problem is slowly migrating into other areas. The affordable sub-markets representing 25% of the state's housing stock accounted for 47.5% of all default activity in Q109, down from more than 52% of all default activity in 2008. DataQuick found foreclosure resales emerging as a significant market factor, accounting for 58.1% of all California resale activity in the quarter, up from 33.1% last year. Foreclosure resales as a percent of total sale activity varied significantly by area, from 13% in San Francisco County to 80.8% in Merced County. Write to Diana Golobay at firstname.lastname@example.org.