HOUSING: Banks waiting longer to foreclose
Homeowners report not paying mortgages for eight months with no foreclosure
By ZACH FOX - Staff Writer | ∞
Some North County homeowners have gone months without paying their mortgages and have yet to receive a foreclosure notice, a development that suggests banks are overloaded and that also might mean foreclosure reports are understating the region's housing crisis.
Foreclosure numbers already are staggering, with about 4,000 foreclosures since January in North County, compared to about 1,300 a year ago. Since January, about 7,500 homes have entered foreclosure, outpacing sales during that time, according to monthly reports from several data firms. Many analysts point to foreclosures as a leading contributor to a 30 percent decline in home values since a 2005 peak for San Diego County.
But even that rate probably fails to include the total number of distressed homeowners in North County.
Several homeowners interviewed last week said that they stopped paying their mortgages six to eight months ago and still have not received a notice of default, which typically comes by the fourth month of nonpayment.
Further, many foreclosures have yet to hit the market, meaning about 500 North County bank-owned homes have not affected prices yet.
Combined with high foreclosure rates and rising delinquency numbers, North County's foreclosure problem appears likely to persist, if not increase, through the end of the year ---- at least.
"It's not even volume anymore. It's a mountain of foreclosures. ... There's no comparison in history," said Ramsey Su, a real estate investor in San Diego who used to run a brokerage firm that sold foreclosures.
Living rent-free
About 1,000 default notices, the first step in foreclosure, have showed up on North County doorsteps each month since January, according to ForeclosureRadar, a Northern California research firm. In contrast, about 820 homes have been sold per month during the same time, according to a monthly housing report by the North San Diego County Association of Realtors.
Typically, the foreclosure process takes about eight months from the first missed payment, analysts said.
But now, real estate agents, mortgage brokers and homeowners are reporting that as many as eight months can pass before a notice of default is filed. From that notice, it takes five to seven more months to complete the foreclosure process.
One San Marcos homeowner, who did not want her name released for fear of initiating foreclosure, said she missed her first mortgage payment in January and has yet to receive a notice of default. Several other homeowners interviewed had similar concerns.
"We have a couple of clients where we're just like, 'Wow, how long are you going to let them live rent-free?'" said John Woodall, a real estate agent who specializes in short sales, a process by which banks agree to sell the home for less than the mortgage amount.
Short sales are notoriously tricky transactions that can take months of negotiations, during which banks will often suspend foreclosure action.
Also, new legislation has extended the amount of time a foreclosure can take by encouraging loan modifications, a process by which banks alter payments to help homeowners avoid foreclosure.
But often, it appears that the delays in foreclosures are simply a result of system overload, analysts said.
"We have found several families, more than a few, who have paperwork that says the house is foreclosed, but the bank is still working with them" on a loan modification, said Gabe Del Rio, director of homeownership at Community HousingWorks, a San Diego nonprofit. "All the while, the family is still in the home."
A different breed of advice
A delay in the foreclosure process has raised the prospect of analysts encouraging homeowners to stop paying their mortgages.
Several counselors are starting to offer that advice to homeowners who are "upside down," meaning that they owe more than the value of their home, said Nathan Moeder, a principal with The London Group, a San Diego real estate firm.
Whether homeowners are actually heeding the advice to intentionally enter foreclosure is unclear, but some advisers are saying it's better to rent for several years after losing a house than to pay on an upside-down mortgage.
"Foreclosure is the right thing" for everybody who is struggling to make the house payment, Su said.
Other organizations, such as Del Rio's Community HousingWorks, advise homeowners to try and stay in the house by working toward a loan modification that makes payments affordable.
Delinquencies up
As government agencies and major lenders press programs that keep homeowners out of foreclosure, the number of homeowners not paying their bills has shot up. Nationally, the number of delinquent homeowners ---- those who are at least 60 days late ---- has gone up each month, reaching a new high at 1.9 million in July, according to data from the Hope Now Alliance, a coalition of major banks and government agencies.
Though no statistics exist on how many homeowners have not paid their mortgages, still reside in their homes and have not received notices of default, the association's statistics show plenty of unresolved delinquencies.
From the third quarter of last year through the first quarter of 2008, about 455,000 homeowners in California became delinquent on their mortgages. Allowing time for a notice of default to be filed, there have been 413,000 foreclosure starts or loan modifications from the third quarter through the second quarter of this year. That leaves 37,000 California homeowners who are delinquent but have not received a foreclosure notice or loan modification.
"Most alarming is the fact that, in spite of all these programs that are trying to save or stop the process, more and more people are not paying," said Su. "The question is, are these programs encouraging people to not pay?"
In times of high foreclosure numbers, it is common to see the foreclosure process drag, he said. During the last housing recession of the early 1990s, Su said one homeowner lived in a home without paying the mortgage for seven years as the banks tried to figure out who actually owned the mortgage.
More to come
Even discounting the thousands of delinquent homeowners who have not received foreclosure notices, many foreclosures have yet to hit the market.
About 27 percent of the roughly 1,800 houses that were seized by banks within the last 120 days have not been listed for sale, according to a North County Times analysis of listing, sales, expired listing and foreclosure data compiled from Redfin, a listing Web site, and ForeclosureRadar. That amounts to about 500 North County foreclosures yet to affect prices. The number is down from March, when about 750 bank-owned homes, or 60 percent of all foreclosures at the time, were not yet listed on the open market, according to a similar analysis.
Further, California has not yet completely worked through payment increases on many of the exotic loan products that some analysts say are a major contributor to foreclosures, according to data from First American CoreLogic, a mortgage data company based in Santa Ana.
Over the next year, about 150,000 subprime mortgages across the state, reserved for riskier borrowers, are going to see payments increase.
That has raised concern among local analysts and economists that San Diego County's foreclosure problem will get worse before it gets better ---- potentially dragging down further an economy many believe is already in recession.
Contact staff writer Zach Fox at (760) 740-5412 or zfox@nctimes.com. Read his blog, "On the Realside," at nctimes.com/blogs/minding_your_business.
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Gil wrote on Aug 30, 2008 5:56 PM:I can't wait until Obama gets in office, he will solve this problem. Don't ask how, but he will solve it. Remember, he was a senator for a whole two years!!!
enicintas guy wrote on Aug 30, 2008 8:16 PM:No, Certainly Sarah Palin can easily fix this, just like she did as mayor of Podunk AK.
Gil wrote on Aug 30, 2008 8:30 PM:LOL - I never said any of these clowns are good for anything, except hot air!!!
TO ENCINITAS GUY wrote on Aug 30, 2008 8:40 PM:If she was a man, you wouldn’t say that!!!! Shame on you!!
Bill wrote on Aug 30, 2008 8:52 PM:For those of us that saved their money all these years, we are cashing in on this "crisis".
Funny how we never hear about the upside to a down housing market. All the people who thought they couldnt afford but now find that they can. What about them? The facts are that most of these foreclsoures were on 100% financed property and the banks are the ones taking the hit. The homeowners are walking away with damaged credit but not much more. They arent losing their life savings as weve been led to believe. The overwhelming majority of these investors were hoping to build equity without putting money down. They went 100% financing with an interest only payment thinking they would re-finance in 6 months and get some cash out. Except, the higher prices go, the fewer the buyers. The market eventually reached the boiling point. While these people are losing their homes, they arent losing their life savings.
I've purchased 4 homes over the last 2 years and got great deals on them because they were all bank owned.
The bank took the hit and not the homeowner.
But Bush wasnt present when most of these people over stated their income knowing all it meant was a sub prime rate. Bush wasnt there and has no blame for this real estate market. Novice investors, with a willing agent and lender are to blame.
The banks are paying the price for lowering their under writing standards and are selling homes for huge losses right now.
Bush had nothing to do with any of that.
Dont Feel Sorry.. wrote on Aug 30, 2008 8:52 PM:I don't feel sorry for anyone who is not paying their mortgages. My gosh, the media makes it like everyone is foreclosing when it is less than 3% of the entire country. These people are overspending and living beyond their means. It is so disgusting, I am so sick of hearing about it. It is time that people start taking responsibility for themselves!!
Great news wrote on Aug 30, 2008 8:53 PM:This is great news if the housing is worse that reported. I can't wait for the homes in San Diego to come down another 100 k. I want to buy my fifth home and get wealthier. So many fools payed way too much money for those homes and now it's time for the smart ones to be rewarded. Thank you overspenders!!
Billy wrote on Aug 30, 2008 9:51 PM:To Bill:
Yes, it's a great time to have cash but please don't give Bush a pass on not being part of the problem. The market doesn't correct easily. The wild swings in the market are not good for the economy. We need oversight from the government to balance the greed of capitalism and Bush didn't get involved.
We are in for a rough ride no matter who's steering the ship.
MJ wrote on Aug 31, 2008 1:45 AM:It is amazing how we dance around the basic truth of this "problem". Simple stupidity, peppered with a little greed. Stupid buyers, stupid lenders, stupid investors. The main way people learn is by making mistakes and living with the consequences of their decisions -- good or bad. For us to progress, there must be consequences, tough ones ... and not bailouts or it will all just happen again and again.
Theotis wrote on Aug 31, 2008 3:50 AM:Well let's just hope that prices keep going down. Lower prices will mean a new base for assessed value, and hence, a lower property tax. MORE folks will be able to afford homes. One's home should NOT be the place to speculate, anyhow! Keep those prices coming down!!!
Hey Encinitas Dude wrote on Aug 31, 2008 3:58 AM:That's really funny! You must be forgetting that she's the ONLY Governor on either national ticket, and so is the ONLY one with significant administrative experience.
Kendog wrote on Aug 31, 2008 4:02 AM:Where's the feminsts on this one? They should be happy that a woman is finally back on a national ticket!! Or do they hate her because she's Republican? Damn hypocrites!
Truth wrote on Aug 31, 2008 9:33 AM:Don't worry the Feds can just print more money and pay all our mortgage. Its easy and free!
If Sarah was a man, he/she would be a Transvestite.... funny stuff.
To Hey Encinitas Dude wrote on Aug 31, 2008 11:22 AM:Good point. When you stop and think about it, Palin has more elected executive experience than all three other candidates combined! I have always found it amusing that some feel spending a career in the legislative branch qualifies a person for an executive position -- actually, the mindset for a legislator is totally different than an executive. It is scary to imagine what a legislative leader like Pelosi or Reid would do to this nation as president --- and if Obama/Biden are elected, we had better start building fallout shelters pronto!
To To Hey Encinitas Dude wrote on Aug 31, 2008 3:27 PM:I wouldn't consider Palin's "elected executive experience" as all that impressive considering that she has been governor of a sparsely populated state for less than two years and before that was mayor of a town with less than 10k people. How is this significant? Administering a town and a state with less than 700k people is a whole lot different than administering the world's wealthiest country (by GDP). Sure she is on the ticket as VP, but let's face the music here -- McCain isn't exactly a spring chicken so folks better start looking at her as if she is running for President. She is not experienced enough for that role and it will spell disaster if McCain is elected. Woman or man it really doesn't matter here folks - she lacks the experience plain and simple.
As for the comments about Bush - his laissez faire approach to the housing market and lending allowed unscrupulous lenders, realtors, and appraisers to inflate the housing market and encouraged speculation. I overheard a couple of mortgage guys and realtors having a conversation at Islands about 2 years ago and they were laughing about the "mortgage broker annuities" and how it was so easy in the market to push qualified folks into ARM's because there was no law requiring amortization tables for the highest possible rate. Folks see the amortization tables for the low rate and don't realize that they are providing false information that really doesn't apply to an ARM. At least require an accurate amortization table for all loans. Folks would be far less likely to take an ARM if they can see the big picture.
Reardon wrote on Aug 31, 2008 3:28 PM:Buy low, sell high.
This is low.
QED
Off topic wrote on Sep 1, 2008 1:20 AM:Did everyone post on the wrong article? I read this as an article about foreclosures, not the election? If it's not about foreclosures, though, I'd like to add my thoughts about Brangelina's adopted children...
Money for lives wrote on Sep 1, 2008 6:09 AM:Amazing... A lot of talk about Bush and his money makers. So little talk about the lives lost because of Bush's war. I guess those that still support Bush have not lost a son or duaghter to his lies and greed for another war.
sarah palin wrote on Sep 1, 2008 6:57 AM:has more balls than you morons
Interesting wrote on Sep 1, 2008 7:08 AM:Foreclosures are not reported and the economy is worse than thought! That seems to be the premise of this story but somewhere it takes an interesting turn. How did the President of the United States get into this. Oh, yes! I forgot? It is Bush... I do not need to say more but for all of you who think being a party member is more important than being an American... Forget what party this man came from, wake up to the fact that something is wrong. Trace the history of this and you will go through the administrators all the way to the top to who appointed them. The greed goes all the way to the top and no matter what party did it, their greed is to fault. The question is, why do you support their greed. Because of your own greed, your blind loyalty to party, or just plain stupidity? Interesting - my verification box just came up with - wmd54 - Remember wmd ? - weapons of mass destruction - more lies...
Brangelina fan wrote on Sep 1, 2008 8:38 AM:Okay, that's it, "Money for lives." I warned you about off-topic posts. Now you have to endure my thoughts about Brangelina's adopted children: It sounds like they're going to keep going, based on comments Brad recently made at the Venice Film Festival: "The twins are fine. I'll have two more by next year." Brangelina already has three adopted children: Maddox, 7, Pax, 4, Zahara, 3, and three biological babies, Shiloh, who is 2, and twin babies. I think there may also be a Zelda and a Xerxes somewhere in there. That's six, seven or eight kids!! I think this is great! I hope they keep at it!! I'm 37, can they please adopt me?!?!?!?
off topic wrote on Sep 1, 2008 12:02 PM:and Palin's 17 year-old daugher is pregnant!!!!
way off topic wrote on Sep 1, 2008 12:51 PM:I happen to like Palin. I also think she looks like Maryanne on Gilligans Island
House Hunting wrote on Sep 1, 2008 2:21 PM:If so many conservatives are anti-abortion, then why are there so many children in orphanages? It's time for the right wing whack jobs to stop talking and start adopting.
I am sticking to the topic wrote on Sep 1, 2008 2:28 PM:will madonna adopt another kid?
Morons wrote on Sep 1, 2008 3:09 PM:There's a buncho of morons again. Can't they see? The only answer is O BA MA
really wrote on Sep 1, 2008 3:10 PM:to House Hunting - that's really of topic...
really wrote on Sep 1, 2008 3:10 PM:to House Hunting - that's really off
topic...
Steve wrote on Sep 1, 2008 3:51 PM:It's a good idea to let the ex-homeownwers get some of their money back with free rent. When this happened in Moreno Valley and Perris in the early nineties when March Air Force base closed, a lot of houses got thrashed and striped of everything that was nailed down (toilets, kitchen cabinets, sinks, air cond. units, toilets, carpet, etc.) except the walls. It's called; "taking back your downpayment".
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