October ‘Bad Month’ for Notice of Default Filings in County
1996 Foreclosure Record To Be Broken for 2007
By MICHELLE MOWAD
San Diego Business Journal Staff
The San Jacinto Valley is at the epicenter of Southern California's descent into the housing market collapse, says the president and CEO of a foreclosure research company.
Hemet and San Jacinto are among the top 10 Riverside County cities experiencing high levels of mortgage defaults, said Serdar Bankaci of Default Research, which specializes in compiling statistics on mortgage defaults for real estate investors seeking to capitalize on the trends.
For October, Hemet is in sixth place with 250 default filings, and San Jacinto in 10th place with 145 default filings.
In the 12 months between September of last year and September of 2007, the number of filings in Riverside County rose from 906 to 4,605.
In San Diego County, filings jumped from 422 last year to 2,734 this year.
What's more, said Bankaci, that trend is likely to continue through 2008, creating a buyer's market not likely to start easing until late next year. “Home inventories are high at this point,” he said.
Between the two cities in the San Jacinto Valley, Hemet is likely to start recovering first, Bankaci said, because its housing inventory is mostly existing while, in San Jacinto, many projects are either going slowly or work has stopped altogether. It will take less time for existing houses to start selling again than to restart the development trend.
Causes of the downturn in what was only recently a red hot seller's market are the same here as they are across the nation, Bankaci said, the end of rapid appreciation combined with declining willingness of lenders to issue mortgages to those whose credit record is poor.
When housing prices began to level out, those who took bigger mortgages than they could afford found themselves unable to keep up with their mortgages because they had been using the rapidly rising equity in their property to pay the mortgages. To make matters worse, many of the mortgages that offered low interest rates - and, thus, low payments - up front are coming up on either balloon payments the homeowners do not have the money to make or substantial increases in their monthly payments, Bankaci said.
Bankaci is among those who believe the market will correct itself and there is little or no reason for government intervention or substantial efforts by the industry to speed that process. “The market is just going to have to readjust,” he said.
Possibly, there will be some revisions of the truth-in-lending laws, but Bankaci said the warnings such laws could mandate exist. “They're right there in big letters,” he said, and the problem is not lack of information, but failure of borrowers to read the contracts they sign.
As for the mortgage brokers who have been caught up in the collapse of the subprime market, “I don't think they were looking long term,” Bankaci said.
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