Loan Defaults

More Californians are failing to make their mortgage payments than at any time in the last 20 years, but fewer of them are losing their homes, according to new figures. The drop in foreclosures follows moratoriums adopted by major banks and mortgage giants Fannie Mae and Freddie Mac. The increase in loan defaults, meanwhile, suggests that rising unemployment and the continuing recession are still claiming fresh victims.

The slumping market for commercial real estate -- viewed by many as the next big shoe to drop on the economy -- now threatens to drag down regional banks as they struggle to collect on loans made against shopping centers and office buildings. Seriously overdue loans against commercial developments have shot up dramatically in recent months, as delinquencies snowball on construction loans and mortgages for office buildings, malls and apartments. That's bad for giants like Bank of America Corp.

The slump in the hospitality business -- made worse by the real estate crash -- has led to dramatic increases in the number of hotels that can't pay their bills. About 250 hotels are in default or foreclosure in California, according to the Irvine consulting firm Atlas Hospitality Group. Los Angeles County has the highest number of troubled hotels: 27, including the 469-room Marriott in downtown L.A., according to a new Atlas report.

Modifying nontraditional mortgages will succeed for many people, but most such modifications will end up in default within a year, a major ratings company predicts. The Fitch Ratings study examined subprime mortgages, jumbo loans and little-documented home loans that Wall Street bundled up to back mortgage bonds from 2005 through 2007.

About 1 in 10 Californians with a home loan is now in default, and there's growing evidence that the mortgage meltdown is spreading to commercial real estate. The home mortgage delinquency rate -- the percentage of borrowers who have missed several payments and are in the first stage of foreclosure -- climbed in June to 9.5% in California and 9.9% in Los Angeles County, according to First American CoreLogic.

Widespread joblessness is causing more Americans to fall behind on their house payments, triggering a new round of foreclosures that some analysts fear could delay the nation's economic recovery. A mortgage trade group reported Thursday that more than 13% of the nation's mortgage holders were delinquent on their mortgages or in the process of having their homes repossessed during the second quarter of this year. That's the highest figure since tracking began in 1972. California's rate, 15.2%, was among the highest of all states.

Defaults on privately insured U.S. mortgages rose 35% in November to a record, an industry report showed Monday, adding evidence about the depth of the U.S. housing slump. The number of insured borrowers falling more than 60 days late on payments jumped to 61,033 last month from 45,325 in November 2006, according to data from members of the Washington-based Mortgage Insurance Companies of America. The missed payments, often a prelude to foreclosure, represented a 2.9% increase from October.

Credit card companies American Express Co. and Capital One Financial Corp. on Wednesday disclosed deepening woes from the growing failure of consumers to repay their debts. American Express, the third-largest U.S. credit card network, said that it would take a fourth-quarter charge of $275 million to cover rising customer defaults and that earnings this quarter would fall below what analysts on average had estimated. Shares hit a 52-week low of $46.

The no-worries lending that inflated the housing bubble is resulting in a flood of soured option-ARM loans, adjustable-rate mortgages that allow borrowers to pay so little every month that their loan balances rise rather than fall, sometimes sharply.

Countrywide Financial Corp. said Friday that home loan delinquencies and foreclosures rose in January as more borrowers struggled to make their mortgage payments. The nation's largest mortgage lender and servicer said loan delinquencies increased to 7.47% last month from 7.2% in December and 4.32% in January 2007. Loan servicers collect mortgage payments and distribute them to the owners of the mortgages. Calabasas-based Countrywide services mortgages totaling about $1.48 trillion.