SANTA CLARA COUNTY BORROWERS LOST A RECORD 1,560 HOMES IN APRIL-TO-JUNE QUARTER
By Sue McAllister
Mercury News
Article Launched: 07/23/2008 01:30:49 AM PDT
The number of Santa Clara County homeowners who lost their properties to foreclosure last quarter jumped more than 500 percent, while those facing that fate nearly tripled, indicating that relief from the painful real estate crisis is still a distant hope.
A few years ago, relatively few homeowners in the county defaulted on their home loans. But the numbers began to shoot upward in late 2006 as the nation's subprime lending woes began. Home prices were falling in some areas, making it harder for strapped homeowners to sell for more than they owed their lenders.
And some owners with adjustable-rate loans found themselves unable to afford their monthly payments once those mortgages began to rise.
With those trends as a backdrop, Santa Clara County posted 1,560 foreclosures in the second quarter, up 512 percent from 255 in the second quarter of 2007, according to DataQuick Information Systems. That's the highest in any quarter since 1988, and mirrors a statewide trend.
Mortgage lenders also sent 3,751 "notices of default" to homeowners in the county in the April-to-June period, according to DataQuick. That's up 22 percent from 3,074 in the first quarter, and up 194 percent from 1,275 in the same period last year.
Lenders send notices of default to borrowers who have failed to pay their mortgages for a few months; the notices are the first step in the foreclosure process.
Both in Santa Clara County and statewide, last quarter's defaults were the highest for any quarter since DataQuick began tracking the data in 1992.
The eye-popping increases may taper off before next year, said DataQuick analyst John Karevoll.
"There is a point at which you can't maintain increases like that, and we're probably approaching that," he said.
In fact, there are signs this may be starting. While statewide defaults hit a record, they grew only slightly from the previous quarter. The number of new defaults rose just 6.6 percent, from 113,809 in the first quarter to 121,341 in the second quarter. The last time the quarterly increase was that small was in 2005, DataQuick said.
Other experts agree, saying a plateau in new notices of default may be at hand. Sean O'Toole, founder of ForeclosureRadar.com, a company that sells subscriptions to its foreclosure data services, said, "We may stay at this level of foreclosure for a year or two, it's certainly possible."
The plateauing of new defaults might also indicate that lenders are "starting to prioritize workouts with homeowners instead of grinding things through the foreclosure process," said DataQuick President John Walsh.
The "workouts" Walsh refers to are situations in which lenders work with defaulting borrowers to modify or restructure their mortgages. In the best-case scenarios, homeowners keep their homes and have mortgage payments they can afford. Often, however, the workout process is unsuccessful and borrowers face foreclosure after all.
Marlene Santiago, a foreclosure intervention counselor at Neighborhood Housing Services in San Jose, said most of the homeowners she works with now owe more on their mortgages than they could get for their homes. Given that, many would rather stop making their high monthly mortgage payments and find someplace to rent - sometimes at half the cost of their monthly loan obligations.
Santiago said about 10 percent of the clients whose loans she submits to lenders for possible modification get approved, allowing the borrowers to stay in their homes under new loan terms.
Contact Sue McAllister at smcallister@mercurynews.com or (408) 920-5833.