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The State of California and The San Diego Housing Commission has enacted Grant programs the help first time home buyers.  You may be eligible for up to $15,000 towards the purchase of your home.

Notices of default plummet

Law making lenders work with homeowners credited




October 24, 2008

A new state law that requires lenders to work harder to help distressed borrowers hold on to their homes led to a steep drop in September default notices in San Diego County, and foreclosures also declined.

A total of 1,206 homes received notices of default, which mark the start of the foreclosure process, the MDA DataQuick research firm reported yesterday. That marked a 58 percent decline from August and a 35 percent drop from September 2007.

While analysts said the September dip was aberrational, it could give homeowners who have fallen behind on their mortgage payments time to work out new payment plans with their lenders. And there are other signs that the housing market might be improving.

Notices of default had fallen slightly in each of the previous four months before the law took effect, and foreclosures have fallen for two months in a row. September's 1,814 foreclosures were down 8 percent from August but still up 163 percent from a year earlier.

For the third quarter, the 7,062 notices of default were up 24.5 percent from a year ago, while the 5,797 foreclosures were up 169 percent.

Kelly Cunningham, an economist for the San Diego Institute for Policy Research, cautioned that the housing market appears to be a long way from recovery. Risky, adjustable-rate mortgages will continue resetting well into 2009, triggering still more foreclosures, he said.

The September slowdown in notices of default affected all of California, DataQuick reported. Analysts said they weren't sure how long it would take for loan servicers to catch up with the workload, as they take greater pains to modify the terms of loans in danger of failure.


Senate Bill 1137, which took effect Sept. 8, coincides with a greater willingness on the part of lenders to negotiate with homeowners. In many instances, the bill calls for lenders to try to contact delinquent borrowers, then wait 30 days before filing a default notice.  

“What is happening is the government and banks are realizing that by forcing so many foreclosures, they are causing a tremendous amount of value deterioration,” said Mark Goldman, a real estate finance instructor at San Diego State University. “They are hurting neighborhoods. They are hurting the value of the remaining collateral.”

According to DataQuick, a typical home foreclosure takes four to six months, if not longer. The new law will add a month to the process, said Dave McDonald, president of the local chapter of the California Association of Mortgage Brokers. The law isn't expected to influence mortgage failure counts until the end of the year.

Alexis McGee, president of the investment advisory firm, believes that the effect of the law will be temporary.

“All it is doing is pushing everything back one month,” she said.

However, Dustin Hobbs, spokesman for the California Mortgage Bankers Association, says the law's impact will be more lasting.

“More borrowers are getting more time to get in touch with their lender and work things out,” he said. “That is definitely a positive development.”

Foreclosure sales continue to place downward pressure on prices. They accounted for a record 47.3 percent of all county resales last month. The median price of a home in the county last month was $328,000, a 6 percent drop from the previous month and a year-over-year decline of 30 percent.

While foreclosures have been devastating to many people, some have found a way to turn bad times to their advantage. Mark Milling, a 44-year-old lifeguard at Bob Wilson Naval Hospital in San Diego, has built a second career as a landlord, buying and repairing run-down condominiums in Lakeside, La Mesa and Mission Valley. He began buying units when prices were low, stopped when they soared in the mid-2000s, and resumed when rising foreclosures pulled prices down.

Milling has several outstanding, interest-only loans that will adjust to prevailing rates between 2015 and 2018. While adjustable loans have forced some investors into foreclosure, Milling says he's not concerned. He expects his rents to rise to offset higher mortgage costs.

“I know the market will turn around,” he said.

Anyone who decides to follow Milling's example should be prepared to pay a hefty price in terms of time and effort, however.

He said that when his units need repairs, “I do all the work myself. I do all the painting and all the remodeling. I have learned to put in tile and plumbing. I have learned how to replace a toilet and fix showers. I have to work very hard. I come home with a sore back and paint in my hair.”

Copyright 2009