New foreclosures surge in California

January 29, 2008 9:16:49 PM PST
Getting a break from your lender may be more easily said than done.

There's been a new surge in foreclosures in California.

According to RealTytrac, which keeps tabs on foreclosures, default notices, auctions and bank repossessions, activity shot up 33-percent last month.

And that brings the total number of foreclosure filings in California for the year, to more than 2.2 million. That's a 238-percent increase from 2006.

The crisis is now affecting nearly two-percent of the state's homeowners.

The Bay Area numbers were only slightly better-- 200-percent higher than 2006. The most increases are in Contra Costa, Napa, and Solano counties.

A San Leandro home was in danger of foreclosure. RealTytrac is reporting foreclosures in Alameda County are up 545 percent over the past two years. The property owners hope to avoid becoming part of those statistics by offering the home as a short sale.

"A short sale is basically someone who is upside down on their loan. The property is worth less than what they currently owe on the mortgage. So they're going to the bank looking for some financial relief," said realtor Perry Vittoria.

Perry Vittoria is a real estate agent in San Leandro. Vittoria says in order to avoid foreclosing on properties on which they hold mortgages, most banks are offering the mortgage holder the opportunity of a short sale.

"They don't want the property. They don't want to retain the property. They don't want to put it on the market and they're trying to have sellers recoup some of their losses," said Vittoria.

Vittoria says many of these homes were purchased with 100-percent financing. Most of those loans adjusted to amounts buyers could no longer afford. He says these homes could now sell for 25-percent or more below the asking price in a short sale.

"It could take up to three months to get a decision back from the bank if they're going to accept the offer," said Vittoria.

Realtors say one of the problems with short sales is the amount of time it takes the lender to approve the loans. Sometimes that discourages many would be homebuyers.

George Tribble is the former president of the California Association of Mortgage Brokers. He says approval delays by lenders are understandable.

"The loan may not be their loan. They're servicing its owned by it's sold through securities on Wall Street. So you have many investors, many are foreign governments that own these mortgages," said Tribble.

Tribble says these short sales may prevent some foreclosures but he believes many more are on the way.

"Right now were probably not halfway through the foreclosures. I think there are many more on the way," said Tribble.