Mortgage default notices filed against California homeowners hit the highest level in about eight years in the final quarter of 2006, real estate research company DataQuick Information Systems reported Wednesday.
Lending institutions sent homeowners 37,273 default notices in the fourth quarter, up 145.3 percent compared to fourth-quarter 2005 and 36.9 percent compared to the third quarter, DataQuick reported.
Last quarter’s foreclosure activity was the highest since 38,053 default notices statewide in third-quarter 1998. Defaults peaked in first-quarter 1996 at 61,541, according to the report. An average of 33,615 notices of default have been filed quarterly in the state since 1992, the first year that DataQuick began tracking those statistics.
“Several factors are at play here. The numbers last year and the year before were very low because of strong sales and appreciation. Also, most defaults occur a year or two after the loan was made, so we’re in a period where the loan pool is at risk,” said Marshall Prentice, DataQuick president, in a statement.
“And then there are those inventive loans that have been made the last few years, where qualifying involves assuming more risk. We’re in the midst of an adjusting market right now, and we won’t know until spring or summer if this is ominous or not.”
Most of the loans that went into default last quarter were originated between January 2005 and February 2006, according to the report, and the median age was 15 months.
In the Southern California region, notices of default rose 140.6 percent in fourth-quarter 2006 compared to fourth-quarter 2005, while increasing 133.9 percent in the San Francisco Bay Area region during that period.
On primary mortgages, homeowners were a median five months behind on their payments when the lender started the default process, with borrowers owing a median $10,555 on a median $324,000 mortgage.
On lines of credit, homeowners were a median six months behind on their payments. Borrowers owed a median $3,582 on a median $60,000 credit line. 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 default in Marin, San Francisco and Santa Clara counties, while the default level was highest in Merced, Riverside and Tulare counties.
About 32 percent of homeowners who found themselves in default earlier in the year lost their homes to foreclosure in the fourth quarter, according to the report, compared with 8 percent in fourth-quarter 2005.
There were 6,078 actual foreclosure sales recorded on homes in the state in the fourth quarter, up 76.9 percent compared to third-quarter 2006 and up 595.4 percent compared to fourth-quarter 2005. Foreclosure sales peaked at 15,418 in third-quarter 1996, and hit a low of 637 in the second quarter of 2005, DataQuick reported. There are 7.87 million houses and condos in the state.
“While foreclosure properties tugged property values down by almost 10 percent in some areas nine years ago, the effect on today’s market is negligible,” DataQuick reported.
