Bay Area mortgages ride out storm 

So far at least, the Bay Area — especially San Francisco, San Mateo and Marin counties — is riding out the worst of a stormy sea of nationwide mortgage defaults and foreclosures. But even though being in a lifeboat is undoubtedly preferable, there is nothing good about being tossed around in stormy seas.

U.S. foreclosures in March were 47 percent more than last year. California’s highest number of mortgage default notices in a decade was during this first quarter of 2007, mostly in Southern California and the Central Valley. With 6,730 defaults, the nine-county Bay Area took an ominous 160 percent jump from the 2006 first quarter — the brunt in the East Bay and North Bay.

To some extent, San Francisco and the Peninsula were shielded from the biggest shockwaves. Despite noticeably slowing equity appreciation, home prices remained high. Continuing steady housing demand from relatively affluent buyers was combined with a tight supply inventory and little space for new construction.

Default notices for accumulated late mortgage payments are the first step toward home foreclosure. Right now, the median California homeowner entering default is five months behind in payments and has fallen $10,784 into arrears on a $331,000 mortgage, according to DataQuick Information Systems.

About 60 percent of the California homeowners entering 2007 in default managed to avoid foreclosure, either by somehow catching up with payments or actually selling their house. But that recovery rate was one-third lower than during the first quarter of 2006.

Most mortgages going into default this year were less than two years old, clearly reflecting the second-year payment spike on adjustable mortgages obtained during the home-loan frenzy of 2005. As house prices peaked in the current run-up, many overly optimistic sub-prime and adjustable mortgages were issued. Lenders and borrowers alike bet that continuing price climbs would provide protection.

Federal bank, thrift and credit union regulatory agencies already are pressing financial institutions to negotiate with homeowners unable to meet their mortgage payments. Neither the law nor accounting standards require immediate foreclosure. And the Homeownership Counseling Act requires lending institutions to inform delinquent borrowers about the availability of counseling help.

A housing market clogged with empty homes for sale is not good for anyone. Even would-be first buyers become hesitant when they perceive home prices are likely to drop further.

The 216 San Francisco homeowners and 382 San Mateo County homeowners who entered default during the first three months of 2007 can take little comfort from knowing they have a better chance of escaping foreclosure than if they lived in Contra Costa or Riverside counties. Much more help and coordination will need to come from government, business and consumer organizations to help Americans get through the long-feared housing slump that is arriving at last.

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Staff Report

Staff Report

A daily newspaper covering San Francisco, San Mateo County and serving Alameda, Marin and Santa Clara counties.
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