Mortgage Defaults Rising Rapidly in California’s Bay Area
More homeowners in California’s Bay Area are facing foreclosure in the third quarter than at any time during the past seven years, and overall, foreclosure activity throughout the state is at its highest level in four years, according to the San Jose Business Journal.
Slower home sales and flattening prices contributed to the 26,705 default notices that went out to homeowners in the state during the three-month period ending in September.
That was up 28.3 percent from 20,812 for the prior quarter, and up 111.8 percent from the 12,606 foreclosure filings recorded in 2005’s third quarter.
Last quarter’s number was the highest since the California housing market’s first fiscal quarter of 2002, when 30,225 default notices were sent out.
Foreclosures hit a low during the third quarter of 2004 when 12,145 default notices were recorded. Defaults peaked in first quarter 1996 at 59,897. The quarterly average since 1992 is 32,653. Foreclosure happens when an owner owes more on their home than the property is worth. When prices are going up fast, as they were from 2001-2005, the number of people in that situation steadily declines.
When prices are flat, or going down, fewer homeowners in financial distress are able to use their homes to bail themselves out of trouble. That’s when the real risk of defaulting on their California mortgage soars.
Statewide, the annual rate of home price increases reached 22.8 percent during the second quarter of 2004. Since then, appreciation has cooled, to 3.7 percent last quarter. Here’s a look at activity specific to several counties south of San Francisco:
- In Santa Clara County, 670 default notices went out, up 55.8 percent from last year’s 430.
- In San Mateo County, 288 notices went out, up 71.4 percent from last year’s 168.
- In Monterey County, 202 notices went out, a whopping 143.4 percent over last year’s 83 notices.
- In Santa Cruz County, 103 notices went out, 33.8 percent over last year’s 77.
The median age of the home loans that went into default last quarter was 14 months, and more than half were originated in 2005. On primary mortgages, homeowners were a median of five months behind on their payments when the lender started the default process.
The borrowers owed a median $9,829 on a median $306,000 mortgage.
On home equity loan payments, as well as varying lines of credit, homeowners were, on average, six months behind. Borrowers owed a median of $3,200 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.
On a loan-by-loan basis, mortgages were least likely to go into delinquency status in Marin, Napa and San Francisco counties. The likelihood was highest in Fresno, Merced and Riverside counties. Historically, the percentage of mortgages in default has been higher in lower-cost inland markets.