California home foreclosures climb as risky loans sour

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Foreclosure proceedings against California homeowners jumped by more than 140 percent in the first quarter, the result of risky loans during boom times, a real estate research firm said Tuesday.

At the same time, the number of homes lost to foreclosure also reached levels not seen since at least the 1980s, according to DataQuick Information Systems.

Lenders sent homeowners 113,676 default notices from January through March, up 143.1 percent from 46,760 during the same period of 2007 and up 39.4 percent from 81,550 during the last three months of 2007.

The first quarter numbers marked the highest foreclosure level since DataQuick began keeping track in 1992.

Default notices mark the first step in the foreclosure process.

Trustee deeds — which represent loss of a home to foreclosure — totaled 47,171 during the first quarter, up 327.6 percent from 11,032 during the same period of 2007 and up 48.9 percent from 31,676 during the previous three months.

It marked the highest level of trustee deeds since DataQuick began keeping track in 1988 and was more than triple the number during the nadir of the previous cycle in 1996.

The foreclosure activity also reflects a drop in home values as owners in a financial pinch were unable to sell properties to cover payments, DataQuick analyst Andrew LePage said.

Most loans that went into default originated between August 2005 and October 2006, according to DataQuick, which said the market was shaking off its "'loans-gone-wild' activity" during that time.

The median age of a defaulted loan was 23 months.

Default notices hit their highest levels in nearly all of California's 58 counties, but Los Angeles County was just shy of its peak in the first quarter of 1996, DataQuick said.

Homeowners in default are now more likely to lose their homes, according to DataQuick. Only 32 percent receiving default notices prevented foreclosure by catching up on payments. A year earlier, 52 percent of those in default were able to avoid foreclosure.

Many homes were financed with multiple loans, which makes it more difficult for homeowners to escape foreclosure. As a result, the 113,676 default notices sent in the first quarter were recorded on 110,392 residences.

The numbers are the latest indication of how badly California has been hit by foreclosures, a result of many homeowners taking loans that their incomes could not afford. The state ranks only behind Nevada — and just ahead of Florida, Arizona and Colorado — in the percentage of households in foreclosure in March, according to RealtyTrac, a research firm.

The foreclosure glut has depressed housing prices overall. Some analysts expect it will worsen as low, introductory interest rates expire on other loans that originated in 2005 and 2006.

One of every three resale homes sold in California from January through March had been foreclosed at some point during the previous year, up from 3.2 percent a year earlier, DataQuick said.

In San Joaquin County, foreclosures accounted for two of every three homes that were resold. In San Francisco County, they made up only 5.1 percent.

Mortgages were most likely to go into default in the central California counties of San Joaquin, Merced and Stanislaus, DataQuick said. They were least likely to go into default in the San Francisco Bay area counties of San Francisco, Marin and San Mateo.