Posted Jul 25, 2007 12:35 am CDT
The number of California mortgage foreclosures has risen by almost 800 percent compared to the same period last year, according to figures released today. And experts predict the record-breaking situation is likely to get worse (or better, from the standpoint of lawyers who make a living representing foreclosing lenders), as a lending-standards crackdown exacerbates an already sagging real estate market.
Such a sharp percentage increase in foreclosures is unprecedented, and the actual number of foreclosures statewide during the second quarter of 2007 also represents an all-time high during the nearly 20 years that records have been kept by DataQuick Information Systems, reports the Los Angeles Times.
There were 17,408 second-quarter foreclosures in the state this year, up 799 percent from the same period last year. The previous record for foreclosures was 15,418 in the third quarter of 1996, when the state was in the sixth year of an economic downturn, and people were struggling to pay their mortgages. Now, the economy is relatively robust, the Times reports, but people are struggling to pay their mortgages because they have borrowed aggressively.
Loans taken out in recent years not only may be at an adjustable rate of interest that is now headed higher, but may have special features. An artificially low teaser rate of interest for the first few years, or flexible payment options that allow the borrower to pay even less each month than the interest due on the loan, can make a mortgage much more affordable initially. When a standard monthly bill for principal and interest finally arrives in the borrower’s mailbox, though, sticker shock can result.
“In the beginning, we were thinking the foreclosures were going to be limited to low-income, high-minority neighborhoods targeted by predatory lenders,” says Ester Cadavid of Los Angeles Neighborhood Housing Services. “Now we’re seeing a shift to the middle class. They’re in trouble too.”