California foreclosure blog

Wachovia's growing pains continue. The bank has decided to waive  prepayment penalties related to its "Pick-A-Pay" option ARM loans, a program that was long popular with Golden West Financial (World Savings). In fact, Wachovia acquired Golden West to grow its home lending business.

What a bust.

For years, California-based Golden West, and its affiliated bank, World Savings, were known locally for being portfolio lenders - lenders who kept their loans, rather than selling them to Wall Street. This fact was often cited as another reason for the Wachovia acquisition. And Golden West did much of their business locally: about 60% of their Pick-A-Pay loans were made in Califonria.

Apparently, Golden West let their guard down during the last real estate boom: Wachovia estimates that the $120 billion Pick-A-Pay loan portfolio will lose 7 to 8 percent of its value. That's somewhere between $8.4 and $9.6 billion. Faced with this prospect, it's no wonder that Wachovia would rather re-write loans, or take early payoffs.

According to a recent Dow Jones report, Credit Suisse estimates that the United States could see foreclosures hit 1.69 million in 2008, with an additional 1.14 million foreclosures expected for 2009.

That's 2.83 million foreclosures.

When we add the 1.29 million foreclosures from 2007 into the mix, we arrive at a grand total of 4.12 million foreclosures nationwide over a three-year period.

Zillow.com estimates that foreclosures make up about 30% of the current housing for sale nationwide. Closer to home, as much as 72% of Stockton's market may be foreclosures.

These high foreclosure numbers are having a real effect on housing markets across the country. With so many foreclosures coming on the market, this trend is depressing property values. The trend has even started hurting home builders, who are now finding prices for their newly built housing units affected by foreclosures right in their new developments.

You gotta love the blogosphere...

I found this post from fellow blogger site Calculated Risk, which summarizes information about California's current default and cure rates from DataQuick.

As of Q1 2008, new defaults statewide have more than doubled (up 143%) compared to Q1 2007, while the current cure rate has dropped to less than one-third (32%), down from about half (52%) in Q1 2007.

Recordings of Trustee's Deeds Upon Sale, the title document that records after a borrower loses their property at a Trustee's Sale, are at their highest rates in the 20 years since DataQuick started tracking Trustee's Deeds. In the first three months of 2008, 47,171 Trustee's Deeds recorded statewide.

For those of us who have presumed that the current foreclosure crisis is limited mostly to borrowers with subprime loans, this New York Times article does a good job to dispel that myth.

According to the Mortgage Bankers Association, in the first quarter of 2008, mortgage loans that are delinquent or in foreclosure are at their highest rates nationwide since 1979, the first year the Association first collected such data. This is the latest record increase in a string of increases dating back to late 2006. While subprime loans default at higher rates than more traditional loans, it looks like "regular" borrowers are having trouble keeping up with their mortgage payments because of the current state of the economy.

Closer to home, the California foreclosure rate for Q1 2008 is over three percent, and the combined rate of foreclosures and "seriously delinquent loans" (over 90 days past due - foreclosure imminent) is near five percent.

To put this in historical perspective, California's real estate loan default rate (number of open Notices of Default on record, compared to all open loans) has usually ranged from 0.5% to 1.5% of all loans. What's more, it used to be that about half of all loans in default would be cured prior to the lender scheduling a Trustee's Sale.

I cannot find current data on the current cure rate, but I doubt that as many loans are being cured in the current market, because the most common methods to cure a loan default are to sell or refinance the property and pay off the old lender. Even if we assume that the cure rate is the same as it has been historically, that still equates to twice as many properties going to auction when compared to the historical high end of the foreclosure range.

Foreclosure is currently the single largest issue affecting California property owners. According to the latest survey from the Mortgage Bankers Association (Q1 2008), over 3% of California real estate loans are in foreclosure (about 182,500 of roughly 6 million loans).

Foreclosures are of special interest to me, because I started my career in real estate back in 1993 as a foreclosure trustee agent - the guy who posts the sale notices and auctions off the properties at the Courthouse. This blog will focus on foreclosure related news and issues. I welcome your comments and feedback.

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The information you obtain at this site is not, nor is it intended to be, legal advice. You should consult an attorney for individual advice regarding your own situation. Also, while I an a lawyer, using this site does not make me your lawyer - this site will not create an attorney-client relationship. You can check out my law firm website for information about how to hire me. Lastly, this is a public site, so any information you send to this site will not be confidential.