First-quarter foreclosure activity in California increased to the highest level in more than two years, the result of slower home-price increases, a real estate information service reported.

Lending institutions sent 18,668 default notices to California homeowners during the January-to-March period. That was up 23.4 percent from 15,122 for the prior quarter, and up 28.7 percent from 14,501 for 2005’s first quarter, according to DataQuick Information Systems.

Foreclosure activity hit a low during the third quarter of 2004 when 12,145 default notices were recorded. Defaults peaked in 1996’s first quarter at 59,897, according to DataQuick, whose default statistics go back to 1992.

“A number of factors are driving defaults higher,” said Marshall Prentice, DataQuick’s president. “The main one right now is that home values are rising more slowly than they have been the past couple of years, which makes it more difficult for homeowners to sell their homes and pay off the lender. Other factors that influence default activity include the amount of equity people have in their property, the type of mortgage they used and how long they’ve had that mortgage.”

Statewide, the annual rate of home-price increases hit a high of 22.8 percent during the second quarter of 2004. Since then, price appreciation has cooled to an annual gain of 12.4 percent in the first quarter of this year. Last quarter, San Diego County saw home values rise 4.8 percent, while its default activity jumped 59.7 percent. San Bernardino County saw home values rise 26.2 percent and defaults increase 17 percent.

The median first-quarter default amount on a primary mortgage last quarter was $9,220 on a loan of $280,000. On second mortgages and lines of credit the median amount owed was $3,386 on a loan of $56,760.

Only about 5 percent of homeowners who find themselves in default actually lose their homes to foreclosure, DataQuick reported. Most are able to stop the foreclosure process by bringing their mortgage payments current, or by selling their home and paying the home loan(s) off.

On a loan-by-loan basis, mortgages are least likely to go into default in the San Francisco Bay Area. The likelihood is highest in the Central Valley and Inland Empire.

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.

DataQuick, a subsidiary of Vancouver-based MacDonald Dettwiler and Associates, monitors real estate activity nationwide and provides information to consumers, educational institutions, public agencies, lending institutions, title companies and industry analysts. The numbers count recorded notices of default, the first step of the formal foreclosure process.

Notices of Default
Houses and condos
County/Region      2005Q1     2006Q1      %Chng
Los Angeles            3,535      4,211      19.1%
Orange                       775      1,107      42.8%
San Diego                 960      1,533      59.7%
Riverside                 1,307      2,148      64.3%
San Bernardino      1,427      1,670      17.0%
Ventura                       261        433      65.9%
SoCal Total             8,330     11,102      33.3%
San Francisco           104        127      22.1%
Alameda                    516        564       9.3%
Contra Costa             576        605       5.0%
Santa Clara                500        527       5.4%
San Mateo                 188        186      -1.1%
Marin                            64         76      18.8%
Solano                       269        294       9.3%
Sonoma                     139        157      12.9%
Napa                            29         47      62.1%
Bay Area Total      2,385      2,583       8.3%
Santa Cruz                  67        108      61.2%
Santa Barbara           93        133      43.0%
San Luis Obispo       70         75       7.1%
Monterey                    79        129      63.3%
Coast Total              309        445      44.0%
Sacramento            763      1,136      48.9%
San Joaquin           451        586      29.9%
Placer                      126        239      89.7%
Kern                         406        461      13.5%
Fresno                     494        540       9.3%
Madera                      55         79      43.6%
Merced                    135        153      13.3%
Tulare                       211        212       0.5%
Yolo                           42         48      14.3%
El Dorado                 62         54     -12.9%
Stanislaus              291        451      55.0%
San Benito               27         49      81.5%
Yuba                          23         48     108.7%
Sutter                        31         28      -9.7%
Central Valley Tot. 3,117      4,130      32.5%
Mountains Total       110         96     -12.7%
North Calif Total       250        312      24.8%
Statewide              14,501     18,668      28.7%

 

 

 

In the first quarter, 88% of the homeowners who refinanced their homes got a mortgage at least 5% larger than the original loan, the highest such percentage since the third quarter of 1990, according to Freddie Mac.  The percentage was up from 81% in the previous quarter and much higher than the 64% level recorded a year earlier, the government-sponsored enterprise said in its quarterly refinance review. “The share of all mortgages that were for refinance fell slightly in the first quarter of 2006 to 44% from 45% in the fourth quarter of 2005,” said Frank Nothaft, Freddie Mac’s chief economist. “…. [T]he first quarter of 2006 is the first time in 20 quarters in which the new mortgage rate was higher than the old one for more than half of refinancing borrowers.” Freddie Mac can be found online at http://www.freddiemac.com.

 

 

LOS ANGELES - The parent company of Ameriquest Mortgage Co. and Town & Country Credit said Tuesday it will close 229 branch offices and lay off 3,800 employees nationwide as part of a plan to consolidate its retail mortgage lending operations.

The restructuring by Orange-based ACC Capital Holdings Corp. is designed to cut costs and help the lender stay competitive, company officials said.

“We are moving strategically and decisively to remain a leader in an industry that is undergoing fundamental changes,” CEO Aseem Mital said in a statement.

Ameriquest is the nation’s largest sub-prime mortgage lender. ACC also operates AMC Mortgage Services Inc., formerly Bedford Home Loans.

The company said it was centralizing its network of branches into offices in California, Arizona, Illinois and Connecticut but would continue to offer lending services nationwide.

In addition to the branch closings, effective as of Tuesday, the company was also trimming positions at its headquarters.

The company declined to comment beyond the statement.

It said the changes would not affect its ability to adhere to the terms of a $325 million multistate settlement reached earlier this year with state attorneys general over claims of deceptive lending practices.

 

 

 

 

Below is a recent exchange between a mortgage broker and a writer for Real Estate Journal:

As an owner of a small mortgage brokerage, I have to take exception with a statement in your recent article as it is not accurate. You wrote, “Unfortunately, most of the kind of skullduggery you describe is committed by mortgage brokers.”

While I agree with your characterization of predatory lending, it is not limited to brokers, nor is it brokers who are primarily engaging in such practices. One need only look at the recent law suits against Household Finance and Ameriquest Mortgage, both major subprime lenders, to know that bankers share just as much responsibility for these types of practices.

Mortgage brokers seem to be the patsies for all the bad lending practices that occur in the marketplace. One reason is because we are small business owners without the propaganda machines and legal counsels of the big banks who repeatedly get away with blaming the little guy. While we do account for over 60% of originations in this country, that does not translate into our being the majority violators. Anyways, I agree with the rest of what you wrote, but I still wanted to set the record straight. Steve.

Response: You are right, and I apologize. I was just a little too glib. But the fact is that the suit — and subsequent settlement — with Household Finance is old news, and the more recent suit and settlement with Ameriquest Mortgage, while huge both in dollar amount and ramification, had to do at least in some instances with practices that the company stopped some time ago. These and other major lenders have drastically cleaned up their acts. But rouge brokers have not. And when they are found out in one jurisdiction, they simply pull up stakes and head elsewhere. The big guys, on the other hand, have nowhere to hide.

That said, every borrower, no matter who he or she is dealing with, should be extremely careful by, among other things, avoiding deals that seem too good to be true; not signing blank documents, papers you don’t understand or those that someone promises to fill out “later;” trying to borrow more than you can afford, no matter what the lender tells you; and not being pressured or rushed. Reputable lenders always allow borrowers to take their time and consult someone they trust. If your instincts tell you something’s amiss, you are probably right.