According to DataQuick,, mortgage lenders sent a record 72,571 “notices of default” to California borrowers during the third quarter, easily smashing the previous record of 61,541 set in 1996.
The number of default notices in the third quarter beat all previous quarters, and climbed 166% higher than levels just 15 months ago.
“We know now, in emerging detail, that a lot of these loans shouldn’t have been made. The issue is whether the real estate market and the economy will digest these over the next year or two, or if housing market distress will bring the economy to its knees,” DataQuick president Marshall Prentice said in a statement.
“Right now, most California neighborhoods do not have much of a foreclosure problem. But where there is a problem, it’s getting nasty.”
Defaults were up in every county in California, but roughly half occurred in just 293 zip codes, most which lie primarily in the Central Valley or the Inland Empire east of Los Angeles.
Perris, Lathrop, and Sacramento were identified as the areas with the biggest default problems.
There were 9,250 default notices in Riverside County in the quarter, more than three times the amount recorded in the same quarter of 2006, while San Bernardino County residents saw 7,038 default notices, up from 2,548 in the third quarter of 2006.
The majority of the loans that went into default were originated between July 2005 and September 2006, just as property values were peaking.
Home prices have subsequently fallen in these hard-hit areas while lenders have tightened underwriting standards, leaving borrowers with resetting adjustable-rate mortgages and zero equity in their homes few practical solutions.
DataQuick said roughly 46% of homeowners who receive defaults notices avoid foreclosure, down sharply from a solid 80% a year ago.
On Friday, the U.S. Census Bureau reported that a record 17.9 million American homes were vacant in the third quarter, a troubling 7.8% higher than the period a year earlier.