California Mortgage Defaults Near Record High

April 17, 2007 No Comments »

A whopping 46,760 notices of default were sent to California homeowners from January to March 2007, an increase of 23.1 percent from the preceding quarter and 148 percent higher from the year-ago period, according to a report by DataQuick.

The number of defaults last quarter was the highest for California since the second quarter of 1997.

According to the data, the majority of the 46,760 mortgages in default were originated by mortgage lenders between April 2005 and May 2006, with a median age of the loan being 15 months.

Looser underwriting standards, appreciating home values, and a surge of subprime lending during that time are to blame for the near record number of mortgage defaults.

Many of the loans involved were also adjustable-rate mortgages and option-arm mortgages, which come with lower start rates and introductory teaser rates that spike after several years or even months.

The hardest hit areas are said to be the inland regions where many lower-income families flocked to find affordable homes amid record-high home prices in California.

Unfortunately, they were misguided into thinking they could afford a home with the promise of further appreciation and super-low mortgage rates that would seemingly never end.

The data, while extremely negative, is not surprising, and probably just the tip of the iceberg.

The news has most analysts waiting for a surge of foreclosures, which will further dampen the economy and the already sluggish housing market.

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