The LAT’s referenced this study put out by DataQuick. It details the trends in the California market:
The number of California homes going into foreclosure jumped last quarter to its highest level in more than 15 years, as the market continued to works its way through declining home values and a pool of at-risk mortgages that were originated in 2005 and 2006, a real estate information service reported.
At risk basically means that the person borrowing is a credit risk and that it should come as no surprise that there is a default in the loan
Although 113,676 default notices were filed last quarter, they pertained to 110,392 homes. The difference is the result of some borrowers defaulting on multiple loans (e.g. a primary mortgage and a line of credit).
Of the homeowners in default, an estimated 32 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 15.9 percent.
Some of the loans now exploding were made in 2005-2006 and were 80/20s where the borrower put 0 down, and other loans were based on the borrower putting virtually $0 down.
I can tell you at least one reason why there are so many foreclosures. FHLMC encouraged lenders to give mortgages to illegal aliens, saying that illegal aliens were an “underserved market”. Exactly how much greater a credit risk can someone be who could be deported at any time? The house next to mine went into foreclosure when the owner picked up his wife and five kids and headed back south of the border when the employer sanctions law passed in the state legislature. Now it’s derelict and has been heavily vandalized.
What FAO says is true and is one factor of the problem. In general, the Gov’t (led by the Democrites) has been pushing lenders to lend to poor and minorities that would normally not have qualified. The practice of “redlining” was attacked. So they relaxed the standards, and guess what? Now they can’t pay and we have a problem. Instead of the Democrites being properly blamed, it is all the fault of the lenders.
During the home frenzy peak, we saw speculators selling homes to each other. When that becomes the majority of the sales, look out! The bubble is about to burst.