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California's Home-Mortgage Defaults More Than Double

April 22 (Bloomberg) -- California mortgage defaults more than doubled in the first quarter to the highest in 15 years as a drop in sales and prices prevented some homeowners from selling their properties to pay debt, DataQuick Information Systems said.

Homeowners received 113,676 default notices, up 143 percent from a year ago, La Jolla, California-based DataQuick said today in a statement. The number was the highest since at least 1992, when DataQuick's statistics begin.

Home sales in both the San Francisco Bay Area and Southern California plunged 41 percent last month, and prices dropped 24 percent in Southern California, the biggest year-over-year drop for a single month since at least 1988, DataQuick said last week. The first quarter's default numbers were a record in almost all of California's 58 counties, DataQuick said today.

``It's still getting worse,'' DataQuick analyst John Karevoll said in an interview. ``Probably the big issue that we and everyone else are carefully examining right now is to what degree this is going to spread and become more pervasive.''

Most of the loans that went into default last quarter were originated between August 2005 and October 2006. The average loan in default was made 23 months ago, said DataQuick, a unit of Richmond, British Columbia-based MacDonald, Dettwiler & Associates Ltd.

Default notices are the first step in foreclosing on a home. About 32 percent of homeowners stop the foreclosure process by catching up on payments, refinancing, or selling their properties to pay what they owe, DataQuick said. That was the lowest percentage since at least 1992, Karevoll said. A year ago, 52 percent were able to stop the process.

Multiple Loans

The decline in the number of homeowners able to halt foreclosure is due in part to the falling number of home sales, DataQuick said. It also reflects homebuyers' increased use of multiple loans to finance their purchases, which makes it harder to seek forbearance, Karevoll said. Multiple-loan financing peaked in the fourth quarter of 2006, when 61 percent of all home purchases were financed with more than one loan, DataQuick said.

``People who get into trouble when they have that kind of financing have extreme difficulty in working things out with their lenders,'' Karevoll said.

In the first quarter, on primary mortgages, California homeowners were a median five months behind on their payments when their lenders started the foreclosure process. Borrowers owed a median $11,474 on a median $346,750 mortgage, DataQuick said.

The number of homes lost to foreclosure totaled 41,171 in the first quarter, the highest in DataQuick's foreclosure statistics, which date back to 1988. The losses were up 49 percent from the previous quarter and more than fourfold from a year earlier.

Merced, San Joaquin

California has 7.9 million houses and condominium units. On a loan-by-loan basis, mortgages were most likely to go into default in the first quarter in Merced, San Joaquin and Stanislaus counties, and were least likely to go into default in San Francisco, Marin and San Mateo counties.

Sales of homes that have been foreclosed upon accounted for about a third of all California resales in the first quarter. That's up from 3.2 percent a year ago, DataQuick said. Foreclosure resales ranged from 5.1 percent of resales in San Francisco County to almost 67 percent in San Joaquin County.

To contact the reporter on this story: Daniel Taub in Los Angeles at dtaub@bloomberg.net.