Volume of California Foreclosure Homes to Grow as Defaults Rise
September 16th, 2009 by 
Joseph Smith
The number of delinquent loans is fast growing, creating concern about another wave of California foreclosure homes in the coming months. Recent market data showed that one in every 10 homeowners in California is in some stage of foreclosure process.
And there are signs that the mortgage crisis is fast spreading to the commercial real estate market. In June, the home mortgage loan delinquency rate rose by 9.9 percent in Los Angeles County and 9.5 percent in California.
Housing experts said that there is a great possibility that the staggering volume of homeowners who missed their mortgage payments will lead to another wave of foreclosures before the end of this year.
They are predicting that the number of California foreclosure homes this year will surpass the 240,000 foreclosures reported last year.
Compounding the problem for distressed homeowners is the proliferation of fraudulent loan modification companies. As of June 2009, the California Department of Real Estate received over 1,100 complaints against fraudulent loan modification companies.
Meanwhile, the current wave of loan defaults is attributed to the rising unemployment and homeowners who owed more on their mortgage than the total value of their properties. And many Californians who bought during the housing bubble gave little or no down payment.
Troubled borrowers who have equity on their properties have an option to sell to cover the balance on their mortgage. However, that seems to be not the case with many homeowners in California. Already 60 percent of delinquent mortgage loans in California ended up foreclosed.
Industry analysts said that repossessions would pick up soon now that voluntary foreclosures and government moratoriums have expired. They however believed that foreclosures would not exceed last year’s numbers if lenders intensify their loan modification efforts or increase the approval for short sales.
In June, default rates rose drastically compared with last year’s 6 percent delinquency rate in California and 5.2 percent in Los Angeles County.
On the other hand, market data also showed an alarming increase in the number of troubled loans in commercial real estate. So far, 14 percent of the total 6,497 loans were in default, a small percentage compared with defaults in the residential real estate market. But analysts warned that more commercial loan defaults are in the offing.
