Just as I predicted over two years ago, the Orange County, California foreclosure tsunami has officially hit the county. The wave is swallowing OC residents and city blocks by the dozen.
The LA Times reported yesterday that data from ForeclosureRadar.com indicated that outstanding foreclosure auction notices in Orange County rose to 8,895 at the end of September, the highest in this housing downturn and probably the highest ever.
In April of 2008 I appeared in Slate magazine and spoke about the fact that negative amortization mortgages were heavily sold in the OC and that the foreclosure wave had not yet hit the county.
Slate Magazine – Here Comes the Next Mortgage Crisis
Subprime was just the beginning. Wait until California’s prime borrowers start handing their keys to the bank.
Option ARM loans were heavily marketed to upper-tier home buyers in California. It’s hard to know how bad the option ARM crisis will be before it actually happens, but Moe Bedard, an advocate in Southern California who advises homeowners on foreclosure and blogs about the crisis at Loansafe.org says that the difference in the time until the rate rises is the main reason that upper-middle-class Orange County (now facing foreclosures at a rate merely twice the national average) hasn’t yet been hit as badly as places like Riverside.
If you think, however, that should make lenders a lot happier, forget it. LoanSafe’s Bedard says that even in this group, most of the option ARM borrowers he talks to—some of them living in $800,000 houses—are already considering walking away from their deeply depreciated homes as soon as the rates reset.
September’s total was up 5% from August and 90% from a year ago. The chart (click for larger image) shows outstanding auction notices going back to January 2007. Auction notices, also known as notices of trustee’s sale, are a warning that a property will be offered for sale, usually at a local courthouse.
LA Times 2008 – O.C.’s coming wave of prime foreclosures?
April 16th, 2008, 12:46 pm · 91 Comments · posted by Andrew GalvinLA
Moe Bedard, founder of LoanSafe.org in Corona, Calif., a free online forum that helps homeowners negotiate loan modifications, said the larger problem is that banks, many of which laid off scores of loan officers, are so swamped that many borrowers can’t get the attention they need.
Many California homeowners, including some with $2 million homes, are simply making their minimum payment, waiting for the recast. Then they plan to walk away, even if it damages their credit, Bedard said.
“A lot of people are just walking,” Bedard said. “It’s just a business decision; they don’t have a lot of skin in the game.” But for many others it will be devastating.
It seems that we are all in need of mortgage help here in California. Even with all the loan modification companies out there many people are still losing their homes waiting for the modification that never comes. When it does come it seems to be in favor of the bank. They payment might be less for the homeowner but the principle in the mortgage did not go down and in most cases the principle goes up during the modification because there is no principle being paid during the modification. Sometimes there is a balloon payment of thousands of dollars after a certain interim of the modification, which the homeowner does not have and had no idea it was coming.