By this year, the bleeding housing market had drained the equity from Judy Jones' home in Murrieta, but her life still seemed secure. She had a government job, after all, and a 30-year fixed-rate mortgage at 5.875%, unlike the shaky, variable-rate loans of many of her Inland Empire neighbors.
Then her employer, the city of Corona, decided to deal with the economic slump by eliminating 112 positions, including Jones' job as a code enforcer. Last month, at age 61, she joined a surge of once-solid borrowers who no longer could afford their mortgages.
"Every week at church, somebody else is out of work," Jones said. "I've been a homeowner a long time -- the last 10 years as a single mother -- and I never missed a payment. Now look at me. And it could be you -- any middle-class person who goes to work today could be walking out the door of a foreclosed house in a couple of months."
Jones' concern is well-founded. Although soaring defaults on subprime loans and other dicey mortgages are a well-known cause of the country's financial crisis, delinquencies and foreclosures now are skyrocketing among "prime" borrowers -- people with good credit histories who documented their incomes when applying for their relatively straightforward mortgages.
Nationwide, 3.07% of prime mortgages were in foreclosure or at least 60 days late in the second quarter of this year, the latest period for which the Mortgage Bankers Assn. has figures, easily topping the previous record of 1.97% set in 1985.
In California, with a jobless rate topping 8% and home prices down more than 40% from their peak and falling, the situation is significantly worse, with 4.15% of prime loans seriously delinquent. That far exceeded peaks of about 2.6% reached in the recessions of the 1980s and 1990s.
The epidemic of bad loans and lost homes among prime borrowers has only worsened since the second quarter ended, according to other, more recent data.
By putting more foreclosed homes on the market, the trend is likely to further depress housing prices, intensify the mortgage-related crisis afflicting the financial system and exacerbate the recession most economists believe is already underway.
"We should be really worried," said Stephen C. Levy, director of the Center for the Continuing Study of the California Economy, a private research firm in Palo Alto.
And as home prices continue to fall, delinquent borrowers are more likely than ever to end up in foreclosure.
