Bargains forecast

"That's the only way I was going to get into anything," he said.

So in 2002 he did what many wanna-be homeowners have pondered from time to time. He bought a property that was in foreclosure through a real estate agent.

Polite ended up with a bank-owned, 1,400-square-foot town house in Sylmar with three bedrooms, 2 1/2 bathrooms and a patio for barbecuing. The home "was a mess," he said, but it was structurally sound. He paid $137,200, while comparable houses were selling for $230,000. Today it is worth $400,000.

The foreclosure process -- initiated by a lender when a homeowner falls anywhere from 30 to 90 days behind on payments -- offers several stages at which buyers can make such a bargain purchase: directly from a homeowner whose loan is in default because of missed payments; at a public auction after an owner has defaulted; or through a real estate agent, for property that has reverted to the lender because no minimum bid was made at the auction.

Foreclosures have been at historically low levels during the last few years. Steep appreciation gave homeowners plenty of equity to tap if they got into financial trouble and buyer demand made it easy to sell homes quickly and at a profit.

Since the beginning of the year, however, foreclosed properties have started coming on the market in increasing numbers. Nationwide, they are up 63% since March 2005, according to RealtyTrac Inc., an Irvine-based company that monitors foreclosures. In Los Angeles County, first-quarter figures from Pittsburgh-based Default Research Inc. show a 63% increase in the number of foreclosures from the same period last year. And there are reasons to expect there will be more ahead.

"Over half the loans on the books today are less than 3 years old," said Douglas Duncan, chief economist of the Mortgage Bankers Assn. "Loans tend to peak in terms of going into delinquency in years three to five."

Adjustable-rate loans have become more popular in the last couple of years, he added. These loans tend to have a higher rate of delinquencies than fixed-rate mortgages. Plus, in the last five years more high-risk buyers have qualified for mortgages. "Borrowers who have not always paid car loans or credit card bills on time," Duncan said, "and are at greater risk of missing mortgage payments."