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Lansner on Real Estate ~ The latest news about the housing market from Orange County Register columnist Jon Lansner.
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25% of O.C. homebuyers grab a foreclosure

August 4th, 2008, 3:33 am · 174 Comments · posted by Jon Lansner/ocregister.com

One-in-four homes resales in Orange County in the second quarter — OK, 25.1% — were residences that had been involved in a foreclosure in the previous 12 months.

That’s the results of a nifty study done by our pals at DataQuick. (For you conspiracy buffs out there: No, DataQuick sales figures DO NOT include the homes taken back by bankers in a given period.)

Foreclosure frequency in O.C. looks pretty good vs. the rest of the state, where 40% of second-quarter sales had previously been through a foreclosure. (And it was 73.3% in Merced!)

How the rest of the state’s most-actively selling counties shape up with this stat:

Rank County Foreclosure Q2 share Rank County Foreclosure Q2 share
1 Merced 73.3% 22 Calaveras 34.0%
2 San Joaquin 69.6% 23 Santa Barbara 33.6%
3 Stanislaus 69.4% 24 Ventura 33.0%
4 Yuba 66.0% 25 Lake 32.8%
5 San Benito 63.0% 26 Kings 30.0%
6 Sacramento 61.4% 27 Los Angeles 29.1%
7 Sutter 60.2% 28 Shasta 28.2%
8 Riverside 58.5% 29 Sonoma 27.5%
9 Solano 57.3% 30 Alameda 27.3%
10 Madera 56.2% 31 El Dorado 25.9%
11 San Bernardino 55.0% 32 Orange 25.1%
12 Imperial 53.6% 33 Santa Cruz 22.0%
13 Monterey 52.5% 34 Butte 17.7%
14 Kern 49.5% 35 Tuolumne 17.6%
15 Contra Costa 46.7% 36 San Luis Obispo 17.3%
16 Fresno 43.0% 37 Santa Clara 16.5%
17 Placer 40.9% 38 Nevada 15.5%
18 Yolo 39.9% 39 San Mateo 13.5%
19 Napa 37.5% 40 Humboldt 8.7%
20 San Diego 37.2% 41 Marin 8.3%
21 Tulare 36.4% 42 San Francisco 5.1%

Other real estate news:

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This entry was posted on Monday, August 4th, 2008 at 3:33 am and is filed under California conditions, Distressed properties, Top tale. You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.

174 Responses to “25% of O.C. homebuyers grab a foreclosure”

  1. truthiness Says:
    August 4th, 2008 at 7:13 am

    Conspiracy buffs? Is this the new name for people reading the newspaper wanting all the facts?

  2. Carlos Says:
    August 4th, 2008 at 7:22 am

    Conspiracy buffs? People who want to know the truth: no hidden agenda no media spin. no mixed reports. Only Facts and investigative report.

  3. provider Says:
    August 4th, 2008 at 7:40 am

    And competition is fierce for that 25%. This won’t last forever. Clearly, normal sellers are letting this whole thing pass, as evidenced by the relentless downward trajectory inventory has taken all year. Phantom, schmantom.

  4. provider Says:
    August 4th, 2008 at 7:48 am

    That Press Democrat article is talking about resets. That’s so 2007. Someone tell them everyone is getting a rework. You don’t even have to ask anymore, much less qualify.

  5. ed Says:
    August 4th, 2008 at 7:53 am

    Never question Jon’s spin or you will be labeled.

  6. Marcia Says:
    August 4th, 2008 at 7:56 am

    Ah Provider. You still have to be able to make the payments.

    Does anyone know someone who gets to keep their 1% teaser rate AND get a reduction in their principal?

    Like I said, this stimulus package will create a false bottom, dragging this thing out even longer.

    It’s unfortunate, but that’s govt for you.

  7. Scott Says:
    August 4th, 2008 at 7:57 am

    “Conspiracy buffs…”

    More like Hale Bob rejects.

  8. provider Says:
    August 4th, 2008 at 8:02 am

    I’ve heard several stories of people getting a 5%-ish rate fixed for 5 more years (I/O). The 1% you are talking about doesn’t even exist at this point, all Option ARMs step up in rate all by themselves. Just another trumped-up, exaggerated story.

  9. provider Says:
    August 4th, 2008 at 8:08 am

    That should be step up in payment.

  10. Mulliganville Says:
    August 4th, 2008 at 8:13 am

    Marcia: A friend of mine in a neg am, whose payment was fluctuating after the reset, had her loan reworked. She was not behind on her payments. She just called the bank to see what her options were and they told her: “your account has been flagged.” She said for what? They then proceeded to reduce her rate to 5.25% fixed for five years, IO. They are being proactive as it is in the banks best interest. Why wouldn’t they…you know?

  11. Marcia Says:
    August 4th, 2008 at 8:21 am

    Mullie-

    At lot of folks can’t afford the 5.25% fixed, even at IO. But the banks will just shove those off on the rest of us taxpayers. Should make all you RE agents happy.

  12. Samson Says:
    August 4th, 2008 at 8:35 am

    Provider is starting to sound like the black night from Monty Python and the Holy Grail. He keeps getting a limp chopped off…”It’s just a flesh wound”!!

  13. poneeboy53 Says:
    August 4th, 2008 at 8:37 am

    Provider,

    Why do cheer people getting their loans reworked? What about responsible people who already have home loans that they make payments on? Shouldn’t they get a 5% rate also? What about people who waited on the sidelines who didn’t get in over their heads? Shouldn’t those people get a 5% rate also?

    I do not see how you like irresponible people to get benifits that repsonsible people don’t. How is this fair and why are you a cheerleader for it?

  14. provider Says:
    August 4th, 2008 at 8:41 am

    And a lot can afford a 5,25% I/O. That’s really your only hope at this point, as subprime ARM issues are trailing off.

  15. provider Says:
    August 4th, 2008 at 8:42 am

    “What about responsible people who already have home loans that they make payments on?”

    I ask this question here often. What about the 65% of people who own who have gotten the shaft?

  16. provider Says:
    August 4th, 2008 at 8:42 am

    I won’t get a re-work, so I think it is fair that I speak for this group. Hell, I wish I could get a 20% discount on my home.

  17. poneeboy53 Says:
    August 4th, 2008 at 8:43 am

    Provider,

    You never answered this question before. Why the name change from Thoughtful? You are not fooling anybody. Where is your integrity?

  18. provider Says:
    August 4th, 2008 at 8:47 am

    Cheerleading is in the eye of the beholder. The crew here celebrate nonstop every shred of bad news. Are you serious?

  19. provider Says:
    August 4th, 2008 at 8:49 am

    “Irresponsible people”? Huh? Taking an ARM makes you irresponsible? I know NBI will agree with you, but I sure as hell don’t.

  20. OhBoy Says:
    August 4th, 2008 at 8:54 am

    In the boom days people said “this will never end”. Basically that everything is more glorious that it really was.

    Now in the bust days people say “this will never end”. Basically that everything is more disastrous that it really is.

    So I take the happy doomsdayers with a grain of salt like I did those that thought money grew on trees.

    Like supposive UFO sightings, so are the doomsdayers playing the game: good business.

  21. Jimmy2 Says:
    August 4th, 2008 at 9:09 am

    Option ARMS are a great product. If there were no option ARMS ten years ago, I would be a renter with no money. Beach homes would have been unavailable to me. It would be a shame if this great product goes away in the name of “social justice”.

  22. Samson Says:
    August 4th, 2008 at 9:12 am

    Heres the basics on the foreclosure provision of the new law.

    “FHA foreclosure rescue - development of a refinance program for homebuyers with problematic subprime loans. Lenders would write down qualified mortgages to 85% of the current appraised value and qualified borrowers would get a new FHA 30-year fixed mortgage at 90% of appraised value. Borrowers would have to share 50% of all future appreciation with FHA. The loan limit for this program is $550,440 nationwide. Program is effective on October 1, 2008.”

    Also, any sort of “rescue” does not apply to those with an HELOC. Meaning you would have to pay off your HELOC, before you would be able to have your original loan refinanced.

    So what percentage of distressed borrowers in Orange County have loans under 550K and have no HELOC?

  23. stashingmycash Says:
    August 4th, 2008 at 9:20 am

    Taking an arm was not irresponsible if you could make the the 30 year payment when it adjusts. I did plenty of arms for people and they just needed the two years to get there credit in line. Some did and others didn’t. I loved getting calls from people I did adjustables for consolidation and 18 months later they call back and they have a 700 score up from 580 and they are ready for thier 30 year fixed. It was rare but the plan was sound. It was the people doing option arms ( neg am loans) and the ATL-A people that new they could never afford the home but were banking on cashing out equity that were irresponsible. They should have been accountable if they gamble and loose. No bail outs for them!

    Marcia is right a majority of neg am borrowers could barley afford the 1.25% and yes it goes up each year but no where near the fully indexed rate where it jumps in the 5th year. Those people won’t get bailed out. Either will the ALT-A people who got IO’s for 5-10 years and when they try to get out and have to qualify using real income they are 75% DTI.

    If the phone volume in the little loan office I worked at is any indication of what’s out there we are in for a long slide and a leveling off at bottom with little gains for years.

  24. stashingmycash Says:
    August 4th, 2008 at 9:22 am

    Samson most have heloc’s! Do you know the DTI limitation?

  25. provider Says:
    August 4th, 2008 at 9:56 am

    Marcia doesn’t understand how Option ARMs work. Strange, considering she’s in banking. Marcia, please tell us all the minimum payment for a $100,000 loan with a 1.25% teaser rate?

  26. provider Says:
    August 4th, 2008 at 10:15 am

    Option ARM payment:

    $100,000 Loan Amount
    1.25% Start Rate
    Index (MTA) 2.855% (July 2008)
    Margin 2.75%
    Fully Indexed Rate 5.605%
    Fixed Period 1 Month
    Payment Cap 7.5%

    Minimum Payment Year 1 $333.25
    Minimum Payment Year 2 $358.24
    Minimum Payment Year 3 $385.11
    Minimum Payment Year 4 $414.00
    Minimum Payment Year 5 $445.05

    Interest Only Payment $467.08

    Fully Amortizing 30 Year Payment $574.39

    Negative Amortization will make the fully amortizing payment be higher by some amount.

    The ONLY way these payments would skyrocket, the way so many wish, is if interest rates went through the roof…..as in a lot.

  27. provider Says:
    August 4th, 2008 at 10:28 am

    Assuming stable rates, the loan above (which had been making the minimum payment) would recast at month 61, with a balance of $105,575.22. The payment for the remaining 25 years (fully amortizing) would be $655.97.

  28. Marc Says:
    August 4th, 2008 at 10:35 am

    So Provider, what you are saying is that 5 years out (from 2005), there will be a whole new batch of problems?

    By the way, I was on option ARMs from 1987-2005, so I am well aware of how they work. I never once refinanced, and rode the interest rates down all the way to a 4% fully indexed ARM. Of course now I would do fixed.

    The problem I see is that buyers bought $800,000 homes, so can even afford the initial resets.

    So yes, for $100K, most could afford the $655.97/month in loan payments. Now multiply that by 8, and you start to see the problem.

  29. Marc Says:
    August 4th, 2008 at 10:36 am

    “can” should be “can’t”

  30. SeekingAlfalfa Says:
    August 4th, 2008 at 10:38 am

    Meredith Whitney is married to a TV Wrestler isn’t she?

  31. Scott Says:
    August 4th, 2008 at 10:39 am

    I wonder if the number of distressed properties that have sold this quarter is much different than the last. As sales for nondistressed properties pick up like we have seen, it is going to push down that percentage. 40% to 25% is rather notable.

  32. provider Says:
    August 4th, 2008 at 10:43 am

    Well, most borrowers who bought $800,000 put money down. Wachovia’s average LTV on Option ARMs at origination was 71%, it is now at 85% adjusted for negam and value declines. The reason I said you may not understand them, is that you seemed to infer that the recast has the double-whammy of rate and adding amortization (going from “1%” to the moon). On day one, Option ARM minimum payments assume principal payments (albeit at the start rate). Most people do NOT understand that. Most people would answer the question above with $104.17. No?

  33. provider Says:
    August 4th, 2008 at 10:46 am

    “By the way, I was on option ARMs from 1987-2005, so I am well aware of how they work. I never once refinanced, and rode the interest rates down all the way to a 4% fully indexed ARM.”

    Bravo.

  34. WaitingInOC Says:
    August 4th, 2008 at 10:53 am

    Provider: I’m not in the banking or RE business, but my understanding of Neg Am loans is that when they do reset (let’s use after year 5 just as an example), that the payment is amortized over the remaining life of the loan (in this example, 25 years). So, that is going to increase that payment. Also, the principal balance will be higher if they have been paying less than the I/O payment, so that, too, will make the re-cast payment higher.

    But, even excluding those adjustments that I believe make the fully-amortizing payment higher than in your example, the 30 year fully-amortizing payment is approximately 72% higher than the minimum Year 1 payment. To me, that is skyrocketing. And the percentage does matter. Again, using your numbers, let’s make that a $600,000 loan instead of $100,000. The minimum payment in Year 1 is $1,999.50. The fully-amortizing 30 year payment is $3,446.34. That’s a difference of $1,446.84 per month, when the borrower started with a payment of just under $2K. Again, this is using your numbers (simply multiplying the Year 1 min. payment and 30 year payment numbers by 6), without adding what I think are other adjustments that would make the re-cast payment higher.

    That is my understanding of these loans. If I am missing something or my math is off, please show me my mistake. If I am correct, then my personal opinion is that the payments will skyrocket.

  35. provider Says:
    August 4th, 2008 at 11:00 am

    You are right, waiting, but all those things are already in my numbers. Yes, year 1 and year 6 payments are very different, but each year they are getting closer. That also assumes every single payment is made at the minimum. The fix I see is that there will be a 5 year I/O window added at month 61. The payment in the example above would be $493.12 (on the recast balance of $105,575.22).

  36. provider Says:
    August 4th, 2008 at 11:02 am

    Of course, that makes the problem worse 5 years later, unless the loan maturity can be pushed out. Maybe these will have to be new loans.

  37. stashingmycash Says:
    August 4th, 2008 at 11:20 am

    Provider- Most fully indexed rates for A borrowers during the boom were in 6’s and if you didn’t have A credit or had limited doc loans they were from 7% to 8.5% and the caps as high as 9.5%. LO’s were jacking the fully indexed rate up becuase the borrower didn’t care becuase they thought they would never have to pay a fully indexed rate and were counting on huge appreciation. LO’s did that to get back points. They often enticed borrowers in by paying all the closing but jacked thier fully indexed rate 2-3% higher to make 4-5 points on the loan. 500k with 5 points on the back is 25k and the borrower never see’s back end points on the docs just one line that says lender credit to broker and a $ amount. Most read that as a credit if they read their docs at all! Some offices specialized just in neg am loans and did tons of them. Remember too that the loan after it recast are most likely adjustable if you don’t have A credit. Some A borrowers were offered fixed, full am loans after recast.

  38. stashingmycash Says:
    August 4th, 2008 at 11:24 am

    Your 5.6% fully index is at par. Any LO doing option arms knows they never pared those loans out. They were the money makers on rebate points………………

    And this is why I never did one!

    Anyone find out what the max DTI (debt to income ratio) is for the bailout loans?

  39. they are down Says:
    August 4th, 2008 at 11:24 am

    Provider, most people were not putting any money down. They were taking an 80/20, 80% with the first bank and borrowing their 20% down with another lender at a much higher interest rate. I personally know of several people who did this.

  40. rants Says:
    August 4th, 2008 at 11:25 am

    meredith whitney is on the front of fortune magazine
    provider couldnt make the front of the pennysaver

  41. provider Says:
    August 4th, 2008 at 11:30 am

    You lost me a little. During the boom, “A” borrowers could get a 30 year fixed in the 4.75%-5.5%, even stated. When you say “jacking the fully indexed rate” I think you mean “margin”. Yes, some Option ARMs have higher margins, but 2.75% is by FAR the most common. All loans are adjustable after the fixed period is over.

  42. provider Says:
    August 4th, 2008 at 11:30 am

    “Provider, most people were not putting any money down.”

    Bullcrap. Define “most”, and I don’t mean anecdotes.

  43. they are down Says:
    August 4th, 2008 at 11:33 am

    Ok, first time homebuyers. I know the move up’s put money down; I’m talking about first time buyers. Oh and all those “flippers”

  44. mav Says:
    August 4th, 2008 at 11:34 am

    ……….. meredith whitney is dreamy……….

    ………. provider is a relic of the housing bubble……..

    ……… provider has a future in the housing bubble museum……. in the option arms / stable rates exhibiit…….

  45. provider Says:
    August 4th, 2008 at 11:36 am

    The assumption that no one puts money down is way off the mark. You all like to think the whole world is made up of median income earning first time buyers….it is not. So, please don’t take broad loan statistics and then mold them to fit into your tunnel-vision ideas. Do you really think that it will behoove you to be so out of touch when your future is on the line?

  46. stashingmycash Says:
    August 4th, 2008 at 11:39 am

    No they started offering fixed at Home123 in 2006 for A borrowers. I worked there. You keep reffering to A borrowers that went full dock. How do you think LO’s got 4-5 points on the back? Have you ever seen a rate sheet? They pay you for charging higher rates. Any LO’s out there to back me on this?

  47. provider Says:
    August 4th, 2008 at 11:40 am

    “Oh and all those “flippers”.

    Flippers put a lot of money down, and then poured cash into the properties as well.

    mav, you have added much to this discussion. Typical bear reaction, the personal attacks are worse when the converstation doesn’t fit their agenda.

  48. they are down Says:
    August 4th, 2008 at 11:41 am

    How is my future on the line?

  49. they are down Says:
    August 4th, 2008 at 11:42 am

    And a lot didn’t.

  50. provider Says:
    August 4th, 2008 at 11:43 am

    L/Os earning 4-5 points are/were a distinct minority. I see we have many Argent (and other) refugees who don’t know of anything else

  51. NationalBubble.com Says:
    August 4th, 2008 at 11:51 am

    wow, look at Marin County, only 8.3% foreclosures. That is where real rich people live. I guess there is a premium to pay for clean air and absence of power plants.

  52. mav Says:
    August 4th, 2008 at 11:55 am

    ……….. oh contraire………… i completely understand how long this mess is going to take to play out……you laid it out as plain as day…. home values are going to be dropping for years……… and years……

  53. nvest80 Says:
    August 4th, 2008 at 12:00 pm

    I don’t have much time today for lengthy discussions but what I didn’t see mentioned yet is that payments often increase while the homeowners’ income* decrease. At least in today’s and tomorrows environment. That has got to hurt one way or another.

    * Income from a fixed income job that is no longer your job, income from a commission based job where the sales volume is down, income from cash out refinance, income from the stock market, etc.

  54. stashingmycash Says:
    August 4th, 2008 at 12:05 pm

    Still at 2-3 points on the back that would make the fully indexed rate much higher than 5.6%. If you only knew what was going on in those offices you wouldn’t be argueing my point.

    You can show me stats and argue you all you want but I know what I saw with my own eyes in the last 10 years of doing loans and it is bad.

    I know loans through 07 and those are going to be the ones defaulting. I don’t know the new program guidlines but the new loans aren’t the problem.

  55. provider Says:
    August 4th, 2008 at 12:05 pm

    Bubble’s disaster (this is commerical, not residential):

    “The percentage of outstanding property loans, including those that are in arrears at least 60 days and in foreclosure, was 0.45 percent, up 0.01 percentage point from May and up 0.21 point from a year ago, the bond rating service said.”

    Now THIS is cheerleading. There is not a single person in the US of A that could possible benefit from this, even if it were really bad.

  56. provider Says:
    August 4th, 2008 at 12:08 pm

    “Still at 2-3 points on the back that would make the fully indexed rate much higher than 5.6%”

    The 5.6% already had YSP. The high costs of which you speak were more of a subprime phenomenon. There were very, very few Option ARMs (relatively speaking) made to subprime borrowers. Most subprime loans were 2,3 and 5 year fixed.

  57. Scott Says:
    August 4th, 2008 at 12:10 pm

    “Income from a fixed income job that is no longer your job”

    Please elaborate.

  58. provider Says:
    August 4th, 2008 at 12:12 pm

    Feel free to do your own research. The “subprime” sheet has no negam loans on it and the “alt a” one has the margins in column 49. Please note the margins are skewed higher by all the 5,7 and 10 years ARMs out there.

  59. provider Says:
    August 4th, 2008 at 12:22 pm

    The New York Fed has a new spreadsheet. At the above link, scroll down to “US Revised”. They have a sample of $9 billion in Alt-A and subprime ARMS. Go to rows 29 and 30. You will see that the Alt-A average fully indexed rate is 6.04% and the average margin is 2.91% (includes normal ARMs). You will also see that subprime average fully indexed rate is 9.13% with a 6.02% margin. These are almost entirely fixed rate ARMs, not Option ARMs. Most Option ARMs fall into the Alt-A category.

  60. stashingmycash Says:
    August 4th, 2008 at 12:40 pm

    Yes the #’s are skewed with arms that the LO’s charged more up front fees in points and junk fees to keep the teaser rate low.

  61. Melody Says:
    August 4th, 2008 at 12:45 pm

    I wonder how many people bought homes they don’t even care for just to make that fast buck? Do they really want to keep that home? We can help them all they want, they just want to get out. I could be wrong but some buyers didn’t even care what the house looked like. There’s a lot