San Diego Homeowners Defaulting En-masse?
As the debate rages on about the relationship between creative mortgage financing and foreclosure
risk, an article in the San Diego Sun today discusses the sudden upswing in defaults across the city and surrounding areas. The number of defaults have risen 60% in the first three months of the year. Neighboring Riverside County, where many San Diegans go in search of more affordable housing, had a 64 percent jump in default notices over the last year. The article presents several interesting vignettes, discussing real life examples of "payment shock," rapid increases in mortgage payments predicted to hit the many borrowers who took out adjustable rate mortgages during the boom. From a national perspective, foreclosures have followed a similar pattern:
“I think we have seen the best of times,” said Zoltan Pozsar, an economist for Moody's economy.com. “From here forward, we will see a deterioration in mortgage credit quality. Delinquencies will start going up. Those will lead to foreclosures for some people, primarily those who hold exotic mortgage loans.
Defaults “will not go through the roof but they will deteriorate because of regions like California, where exotic loans are dominant.”
Personally, I am anxiously awaiting the Q2 foreclosure numbers. With much of the recent rise in rates hitting borrowers' bottom lines now, these numbers should lend more credence one way or the other about the ARM-Foreclosure link. Foreclosures due to ARM-induced payment hikes are often cited as a potential catalyst for a housing bust.. stay tuned...
