Sunday, April 23, 2006

There Are Reasons To Expect More LA Defaults

The LA Times has this on foreclosures. "Since the beginning of the year, however, foreclosed properties have started coming on the market in increasing numbers. In Los Angeles County, first-quarter figures show a 63% increase in the number of foreclosures from the same period last year. And there are reasons to expect there will be more ahead. 'Over half the loans on the books today are less than 3 years old,' said Douglas Duncan, chief economist of the Mortgage Bankers Assn. 'Loans tend to peak in terms of going into delinquency in years three to five.'"

"Adjustable-rate loans have become more popular in the last couple of years, he added. These loans tend to have a higher rate of delinquencies than fixed-rate mortgages. Plus, in the last five years more high-risk buyers have qualified for mortgages. 'Borrowers who have not always paid car loans or credit card bills on time,' Duncan said, 'and are at greater risk of missing mortgage payments.'"

"When they were plentiful in the early '80s and mid-'90s, foreclosures could be purchased for as little as half of market value, according to agent Joseph Harrison Soaris, who has been selling bank-owned properties for 25 years. Today, California foreclosures sell on average for 88 cents on the dollar, according to Rick Sharga."

"'The best deals are buying from the owner before the foreclosure,' said Alexis McGee, 'the minute the notice of default is filed.'"

"Notices of default, as well as public auctions of foreclosed properties, for Los Angeles, Orange, Riverside and San Bernardino counties are published in the Daily Commerce, a legal newspaper. The notices, which indicate a homeowner may be headed for foreclosure and a public auction, are also published in the Los Angeles legal daily Metropolitan News-Enterprise and on paid websites. Another way to find properties in the pre-foreclosure stage is through word-of-mouth. "

"'Last year, when we pulled defaults in 90008 [Baldwin Hills, Leimert Park], 90056 [Ladera Heights] and 90043 [View Park, Windsor Hills], we had three pages,' said (realtor) Patricia Penny. A recent search yielded 13 pages."

"If a defaulting borrower doesn't sell but loses a house, a public auction is scheduled. This is perhaps the hardest stage at which to buy a foreclosure. Public auctions in California require payment by cashier's check for the entire bid. Because the final amount cannot be predicted, buyers must bring one check for the minimum bid, typically the amount owed on the property, and additional incremental checks for any overbidding."

"'A lot of people make the mistake of thinking the right place to start is at the auction sale,' said Sharga of But 'that's the highest risk point of the foreclosure buying process,' he said, because the buyer is limited to a drive-by inspection of the house and doesn't know the condition inside."

"'Unless you've done your homework, you could be liable for other liens,' such as a second mortgage, he added. 'You probably want to work with a professional to get through the first purchase.' That's why home buyers frequently turn to agents."

"To find properties for his clients, foreclosure specialist Soaris works with 10 banks. When he has bank-owned property to sell, he often turns to repeat investors. He cautions that the homes often are in bad shape."


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