San Diego UNION-TRIBUNE - September 20, 2008
Foreclosures also decline; experts say it's too soon to know what data mean
Default notices to San Diego County homeowners fell for the fourth straight month in August, signaling a possible easing of the housing market slump, MDA DataQuick reported yesterday.
Defaults, the first step on the way to possible foreclosure, numbered 2,850 last month, down from 3,006 in July and off 13.6 percent from the record set in April.
Foreclosures also dropped, with 1,979 in August down from the record 2,004 in July. It was the first month since March that both defaults and foreclosures were down, according to the San Diego-based research firm.
“I think it's too early to say it's a definite sign of a peak or plateau, but it might be,” DataQuick analyst Andrew LePage said. “There's a lot of talk of multiple waves (of foreclosures and defaults), and this just may be one cresting – there's no way to really know that. This would be heartening for the (real estate) industry.”
Still, there were more new foreclosures than sales of previously foreclosed homes. DataQuick previously reported 1,211 foreclosure sales, or 43.2 percent of all August resale transactions in the county. A year ago, there were 361 foreclosure sales and 825 foreclosures.
The declining default count could stem from several factors, LePage and other observers said. It could mean that fewer people are having trouble keeping up with their monthly payments. More banks might be helping owners avoid default by restructuring their loans. Or lenders may be so overwhelmed with nonpayment that they are falling behind in sending default notices.
“The next two or three months will be telling for San Diego to see if that pattern holds,” LePage said. “Again, it could belie the actual amount of distress out there. It could be a rerouting (of troubled loans) toward workouts and more short sales.”
According to the state Department of Corporations, workouts – lenders restructuring loans – increased 16.7 percent statewide from June to July, the last month for which there is information. Since January, the monthly count of loan modifications has more than doubled to 12,657.
There is no accurate count on short sales – homes sold at less than the loan balance – but DataQuick estimated that more than 60 percent of homes sold at a loss this summer in the county, compared to their previous purchase price.
Meanwhile, the U.S. Department of Housing and Urban Development's Western regional office is setting up a Foreclosure Solutions Clearinghouse as a forum for communities to share ideas on how they're coping with the subprime mortgage meltdown.
“It will be a resource on what local communities are doing – whether it's new laws, new strategies, or just plain new thinking with new players – with info on who to contact, what results they appear to be getting, when it started, and all the other things folks will want to know,” according to the HUD office's online newsletter.
Mark Goldman, a mortgage broker with Windsor Capital Mortgage and a lecturer in the real estate program at San Diego State University, read the latest figures as a possible stabilization of the distressed-home market.
“There's still work to be done, unfortunately, but hopefully we've gone over the crest,” Goldman said.
He said a new wave of troubled loans is on the horizon – including negative amortization loans, under which the loan balance grows rather than shrinks because borrowers are allowed to pay less per month than usual. Holders of adjustable-rate loans, taken out at the peak of the market, also could face higher loan payments in coming months and fall into default and foreclosure.
Paul Leonard, director of the Center for Responsible Lending, said the deteriorating California economy – unemployment rose sharply to 7.7 percent statewide, according to figures released yesterday – may complicate any housing recovery.
“(That) should also put more upward pressure on default rates for all types of loans,” he said.
Meanwhile, a new state law that became effective this month requires more time before lenders can send a notice of default.
And local organizations are gearing up to take advantage of $4 billion set aside in the recent federal housing bill to deal with abandoned or foreclosed-upon properties.
Even before the funding became available, Jim Bliesner, director of the San Diego City-County Reinvestment Task Force, had been advocating establishing a land bank to buy foreclosure properties.
How much San Diego will get is unknown, but the allocation formula is tied to the number of foreclosures in local jurisdictions. Later this month, HUD expects to announce a breakdown of how much money various communities will receive.
“We've been working with a broad group of community organizations and government agencies to identify a local strategy that involves the land bank, foreclosure counseling and preparing qualified new home buyers,” Bliesner said. “The task force will take its recommendations to the San Diego City Council within the next 30 days.”
HUD spokesman Larry Bush said Northern California communitiesalso are coming up with plans on how to spend the money.
“San Diego may well provide a model that a lot of communities may want to use,” he said.
