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California mortgage defaults rise for first time in 3 years

California mortgage defaults rise for first time in 3 years
The Associated Press
(Updated Friday, October 28, 2005, 5:30 AM)

LOS ANGELES (AP) - Mortgage defaults in California increased for the first time in more than three years during the third quarter of 2005, according to newly released data.

The bulk of the default notices were sent to Southern California addresses, according to DataQuick Information Systems, a La Jolla-based research service.

Analysts attributed the statewide rise to slower price gains and riskier loans, which give homeowners less margin for error.

Default notices can lead to foreclosures, in which owners lose their homes due to missed or late payments.

"Foreclosure activity has bottomed out and is starting to go back up," said John Karevoll, DataQuick's chief analyst.

Lenders sent default notices to 12,568 California homeowners during the July-September quarter, a 3.5 percent increase from the same period in 2004, according to DataQuick. Default notices hadn't increased statewide on a year-over-year basis since the first quarter of 2002.

Data show that default activity jumped 20 percent in Southern California but dropped 13 percent in the Bay Area. That's because home prices in Northern California are rising at a faster rate than down south, Karevoll said.

The median price of a Bay Area home rose 19 percent in September to $616,000, while Southern California's median rose 16 percent to $475,000.

Despite the uptick in default notices, activity was well below normal levels and affected a fraction of the state's 17 million residential properties, Karevoll said.

Financially distressed homeowners have largely been able to avoid foreclosures because rising real estate prices allow them to sell their properties instead.

"Why abandon a property to foreclosure when it was so easy to sell and get a good price?" Christopher Cagan, research director at title holder First American Corp.'s property research unit, said in the report to be released Friday.

A rise in foreclosures could drive down home prices because properties sold due to foreclosures tend to be priced below market.

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Information from: Los Angeles Times, http://www.latimes.com


LINK: http://www.fresnobee.com/state_wire/story/11407800p-12153153c.html