The number of Californians defaulting on their mortgage loans is rising rapidly, according to figures released Tuesday, providing striking evidence that more people are at risk of losing their homes.
Default notices jumped 145% in the last three months of 2006, accelerating a trend that began in late 2005 as home sales started to cool.
For The Record
Los Angeles Times Saturday January 27, 2007 Home Edition Main News Part A Page 2 National Desk 1 inches; 41 words Type of Material: Correction
Mortgage defaults: A chart accompanying an article in Wednesday's Section A about the rise in the number of Californians defaulting on their mortgage loans labeled data about notices of default as being for Southern California. They were for all of California.
It was the largest number of default notices in any three-month period since 1998.
Analysts said the increase was not worrisome -- yet. But if the number continues to escalate, it could drag down home values in certain communities, they warned.
"So far, this isn't alarming," said John Karevoll, chief analyst at DataQuick Information Systems, which compiled the data. But if default notices "keep going up at this rate, it could get nasty fast," he added.
Home markets that are most vulnerable include the Inland Empire and the Central Valley, both of which drew throngs of first-time buyers even as the housing boom was ending.
Such homeowners are the most at risk of losing their homes because they have relatively little equity in their properties, making it harder to refinance their mortgages.
Default notices are the initial step in the foreclosure process. In the fourth quarter of last year, lenders issued such notices to 37,273 borrowers across the state, warning them that they were at risk of foreclosure, compared with 15,196 during the same period a year earlier, DataQuick said.
Not every notice of default leads to a foreclosure, when a property is seized and sold to pay the mortgage. But foreclosures also are on the rise. There were 6,078 in the last quarter of 2006, up from 874 a year earlier.
Defaults and foreclosures fell steadily starting in the late 1990s as housing prices took off. In those heady days, practically anyone needing money to pay bills could refinance, cashing out equity from what seemed to be an endlessly refilling piggy bank.
In a stagnant or falling market, that option isn't available to recent buyers or those who have visited the pig once too often. Instead, many of those who are unable to make their payments must either sell the property or let the bank take it over.
During the mid-1990s, this process reached its peak as quarterly default statistics routinely exceeded 50,000 and foreclosures topped 15,000. (The housing stock has grown since then, making the 1990s numbers even worse by comparison.)
