The numbers of Inland families who lost their homes to foreclosure surged dramatically last month, as risky subprime mortgages strained the budgets of more households.
Riverside County posted 7,266 notices of defaults, trustee sales and lender repossessions, up 347 percent from a year earlier, and San Bernardino County posted 4,876 such notices, up 351 percent in a year, according to a report Tuesday by RealtyTrac, a foreclosure marketing firm based in Irvine.
In California, Riverside County ranked fourth and San Bernardino County ranked eighth in foreclosure activity.
“I think a lot of the loans going bad now are the highest-risk kind of loans,” said Rick Sharga, RealtyTrac’s vice president of marketing. “They were probably subprimes with adjustable rates and probably with 100 percent financing.”
An especially telling statistic is the comparison of bank repossessions from last year, or even the prior month, to August.
In Riverside County, 21 homes were seized by lenders in August 2006. In July, 189 were seized. Last month 1,198 homes were repossessed. In San Bernardino County, 10 homes were seized a year ago. Lenders repossessed 518 in July. Last month, it was 708.
Properties with mortgages in default are increasingly being lost to foreclosure because there is not enough equity left in them to give their owners an option to sell or refinance, Sharga said.
Worse Is Ahead
Because more mortgages for subprime borrowers with poor credit or no down payment are scheduled to reset at rates that some borrowers will not be able to afford, the foreclosure picture will worsen before it brightens, Sharga said.
“There are at least two more big groups of subprime adjustable resets that will take place over the next 12 months and we will probably see a spike in foreclosure activity both times,” he said.
Riverside County had one foreclosure filing for every 96 households and San Bernardino County had one filing per 134 households.
The Inland region’s foreclosure pain was far more severe than for the nation on average, which had a foreclosure rate of one filing for every 510 households.
John Karevoll, an analyst with DataQuick Information Systems, which also monitors foreclosures, said the company is seeing “significantly higher default and foreclosure rates where bad loans were made” and the Inland Empire is one of those areas.
Lenders used the subprime mortgages to help people afford to buy houses as prices skyrocketed during the recent housing boom. Such loans are no longer being made but those that remain are having a lingering effect.
How long the rash of risky loans will hobble the housing market is a matter of dispute, Karevoll said. Some analysts predict the market could begin to stabilize in about six months after most of the loans reset. Others worry that by then home prices might fall enough to put other mortgages at risk of default.
The deluge of mortgage defaults has caused lenders to tighten mortgage requirements, making it increasingly difficult for people to qualify as prospective homebuyers. Real estate experts say that the shortage of buyers has further depressed home sales and pushed down home values.
A Couple’s Plight
Nancy Rubi said an unaffordable mortgage and falling home prices in her Orangecrest neighborhood forced her and her husband to try to sell their house even if it means getting less than they owe their lender.
The couple refinanced two years ago to consolidate bills, she said.
They intended to refinance again before the mortgage would adjust to a higher interest rate. But in August when their rate soared from 6.7 percent to 9.7 percent and their payment from $4,200 to $5,800, they learned falling values left them too little equity to refinance.
Making matters more difficult, she said, the couple two years ago bought a larger house to have space for their four adopted children. Then they rented out their first home for $2,000 less than the mortgage payment.
Rubi said that she, a district sales representative for the California State Lottery, and her husband, a retired schoolteacher, can no longer afford both mortgages.
Although her husband held an open house seven days a week since July 20, Rubi said they couldn’t get the $685,000 price they need to repay their mortgage. Their next step, she said, is to try to persuade their lender to accept less than the mortgage.
Because the couple is 30 days behind on their mortgage payments, she figures they have six to nine months to find a buyer before the house goes to foreclosure.
“We never, ever thought it would end up like this,” she said.
California counties ranked by households per foreclosure filing: