Posts (RSS)House Foreclosed Listing Slowing in San Diego amid Defaults
The pace of house foreclosed listing and issuance of default notices slowed in San Diego, according to real estate market analysts. But the rate of delinquencies is still rising, based on statements from government agencies and mortgage lenders.
In August, notices of defaults in San Diego County dropped to 2,658 notices, a nearly 20 percent drop from 3,318 notices in July and a 6.7 percent decrease from notices in August last year. It also marked the lowest number since November 2008.
Mortgage analysts however said there has not been a slowdown in the intensity of distress suffered by borrowers. The delinquency rate is still rising and the number of defaulting borrowers unable to pay their arrears continues to rise.
Typically, the analysts said, the banks file notices of delinquencies after 2 or 3 months of missed payments and then proceed with foreclosure within 6 months from the first missed payment.
According to the analysts, the decline in default and foreclosure notices may have been driven by the increased pressure from government agencies and housing advocates for more loan modifications and the increased efforts to complete short sales to avoid house foreclosed listing.
But based on initial data, about 50 percent of borrowers who have obtained loan modifications have not been able to sustain payments because of reduced income, job loss, existence of other personal debts and family problems.
There are also reports that many modified loans have not reduced monthly payments, but instead increased them because lenders have added unpaid balances and other fees to the principal.
Many other monthly payments have also increased substantially after modification because these loans are originally option adjustable rate mortgages which featured very low monthly payments. Adjusting from very low monthly payments to higher levels but typical for conventional loans is certainly difficult for many borrowers.
Norm Miller, a professor of real estate at the University of San Diego, said that the improving default and foreclosure numbers may be reflecting the slight improvement in the unemployment situation. He explained that the jobless rate in San Diego in August remained unchanged while the nationwide and statewide rates increased.
In addition, the shift in foreclosure and default trends also occurred in the type of communities affected. While foreclosures slowed in moderate-income areas targeted by subprime lending, the pace of house foreclosed listing is now rising in higher-income communities where most houses were purchased with prime loans.