The price tag for the nation's housing crisis escalated again with reports Tuesday that a record number of Californians lost their homes to foreclosure in the last three months and that a potential bailout of mortgage giants Fannie Mae and Freddie Mac could reach $25 billion.
The figures were released as the House prepared to vote as early as today on legislation aimed at staving off foreclosures, stimulating the troubled housing market and providing a government backstop to Fannie Mae and Freddie Mac.
For The Record
Los Angeles Times Saturday, July 26, 2008 Home Edition Main News Part A Page 2 National Desk 2 inches; 64 words Type of Material: Correction
Home foreclosures: An article in Section A on Wednesday on home foreclosures said the number of homes repossessed in California in the three months ended June 30 increased 33.5% from the same period last year. The increase was from the first quarter of 2008. The article also said that DataQuick Information Systems began tracking foreclosure data in 1992. The firm's tracking began in 1988.
Rep. Loretta Sanchez (D-Garden Grove) said the new California foreclosure numbers were "alarming," and point to the need for rapid approval of the legislation.
Foreclosures statewide jumped 33.5% in the three months ended June 30, compared with the same period last year, DataQuick Information Systems reported. The 63,061 homes taken back by lenders were the most for a three-month period since the firm began tracking this data in 1992.
The latest figures contained one surprise: defaults -- the first step toward foreclosure -- rose by just 6.6% in the second quarter, down from a 39% spike the previous period.
DataQuick President John Walsh said the reason was not immediately clear. Foreclosures may be "nearing a plateau," he said, but it could also mean that lenders are "swamped and can't handle processing any paperwork."
Sean O'Toole, founder of the data tracking firm ForeclosureRadar, thinks the leveling off may mean that defaults on subprime mortgages -- loans made to poorly qualified buyers -- are nearing a peak.
But the housing market still could face a new wave of defaults from other loans that will adjust to higher rates, including pay-option adjustable-rate mortgages and so-called Alt-A loans, which are a step between subprime and high-quality prime loans.
"Most resets on those products are still in front of us," O'Toole said.
UCLA economist Edward Leamer agreed that the default rate on Alt-A loans, a specialty of failed Pasadena lender IndyMac Bank, could be pivotal.
"The big uncertainty is what happens when all those Alt-A's reset," he said. Those mortgages were also more prevalent in higher-priced housing markets, he noted, where there have been fewer foreclosures.
O'Toole said that even if foreclosures do level off, it probably will take years for the market to absorb all the homes that are being resold by lenders at steep discounts.
