MDA DataQuick. The San Diego firm tracks real estate trends nationally via public property records. Last quarter's total was an all-time high for any quarter in DataQuick's statistics, which for defaults go back to 1992. There were 121,673 default notices filed in second quarter 2008 and 94,240 in third quarter 2008, during which a new state law took effect requiring lenders to take added steps aimed at keeping troubled borrowers in their homes. "The nastiest batch of California home loans appears to have been made in mid to late 2006 and the foreclosure process is working its way through those. Back then different risk factors were getting piled on top of each other. Adjustable-rate mortgages can be good loans. So can low- down-payment loans, interest-only loans, stated-income loans, etc. But if you combine these elements into one loan, it's toxic," said John Walsh, DataQuick president. The median origination month for last quarter's defaulted loans was July 2006. That's only four months later than the median origination month for defaulted loans a year ago, in first quarter 2008. That suggests a period where underwriting criteria were particularly lax.
Of the 3.7 million home loans made in 2004, less than 1% have since resulted in a lender filing a default notice. Of the 3.7 million loans originated in 2005, 4.9% have triggered a default notice so far. Of the 3 million in 2006, 8.5% have so far resulted in default. A particularly toxic period appears to have been August through November 2006 which had more than a 9% default rate. Of the 2.1 million loans made in 2007, it's 4.6% -- a percentage that's likely to rise significantly during the rest of this year. The lending institutions with the highest default rates for loans originated in August to November 2006 include ResMAE Mortgage (69.9 percent of loans resulting in a default notice), Master Financial (64.6 percent) and Ownit Mortgage Solutions (63.6%). Of the major lenders, IndyMac has a default rate on those loans of 18.9%, World Savings 8.0%, Bank of America's ( BAC) Countrywide 7.7%, JPMorgan Chase's ( JPM) Washington Mutual 6.3 percent and Wells Fargo ( WFC) 3.4%. Less than 1% of the home loans originated in late 2006 by Citigroup ( C) and Bank of America have since gone into default. Many, if not most, of the loans made in 2006 are owned and/or serviced by lending institutions other than those that made the loans (mortgages are often sold off after the initial lender originates the loan, and are often serviced by a different entity). Many of the originating lending institutions no longer exist. While most first quarter 2009 foreclosure activity was still concentrated in affordable inland communities, there are signs that the problem is slowly migrating into other areas. The affordable sub-markets, which represent 25% of the state's housing stock, accounted for more than 52.0% of all default activity in 2008. Last quarter it fell to 47.5%.
On primary mortgages, California homeowners were a median five months behind on their payments when the lender filed the notice of default. The borrowers owed a median $12,926 on a median $346,400 mortgage. On home equity loans and lines of credit, borrowers owed a median $4,229 on a median $63,600 credit line. However the amount of the credit line that was actually in use cannot be determined from public records. MDA DataQuick is a division of MDA Lending Solutions, a subsidiary of Vancouver-based MacDonald Dettwiler and Associates. MDA DataQuick monitors real estate activity nationwide and provides information to consumers, educational institutions, public agencies, lending institutions, title companies and industry analysts. Notices of Default are recorded at county recorders offices and mark the first step of the formal foreclosure process. Although 135,431 default notices were filed last quarter, they involved 130,718 homes because some borrowers were in default on multiple loans (e.g. a primary mortgage and a line of credit). Multiple default recordings on the same home are trending down, DataQuick reported. Mortgages were least likely to go into default in Marin, San Francisco, and San Mateo counties - the historical norm. The probability was highest in Riverside, Merced and San Joaquin counties. Trustees Deeds recorded, or the actual loss of a home to foreclosure, totaled 43,620 during the first quarter. That's down 5.5 percent from 46,183 for the prior quarter, and down 7.6% from 47,221 for first-quarter 2008. They reached 79,511 during last year's third quarter before dropping because of lenders' temporary policy changes (e.g. a temporary foreclosure moratorium).
In the last real estate cycle, Trustees Deeds peaked at 15,418 in third-quarter 1996. The state's all-time low was 637 in the second quarter of 2005, MDA DataQuick reported. There are 8.5 million houses and condos in the state. Foreclosure resales have emerged as a significant market factor, accounting for 58.1% of all California resale activity last quarter. A year ago it was 33.1%. Foreclosure resales varied significantly by area, from 13.0% in San Francisco County to 80.8 percent in Merced County.