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Bakersfield foreclosure rate among top 10 in U.S.
| Tuesday, Aug 14 2007 10:30 PM
Last Updated: Tuesday, Aug 14 2007 10:44 PM
Bakersfield homeowners are falling behind on their mortgage payments at a rate outpacing borrowers in nearly every other city in the nation, according to a new report released Tuesday.
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Foreclosure filings were issued for one in every 47 households in the metropolitan area during the first six months of this year, according to the real estate data firm RealtyTrac.
Bakersfield had the eighth highest foreclosure rate among the nation's 100 biggest cities. The Central Valley cities of Stockton and Sacramento also made the top 10.
And the report may be just the start. Masses of local homeowners may lose their homes and see their credit ruined in coming months and years, industry insiders say.
"Anybody thinking this is going to get better -- that's not true," said Bruce Norris, a Riverside investor who analyzes California's market.
In recent years, borrowers turned to riskier loan options to keep up with exploding prices, he said.
And many of those loans have yet to reset. Higher interest rates generally kick in after three years, meaning today's foreclosures may foreshadow many more, Norris said.
For those with little home equity, hanging on to a home as prices fall and payments rise can prove impossible.
Last year, 40.3 percent of California's first-time homeowners and 21.2 percent of all homeowners bought with zero-down loans, according a report by the California Association of Realtors.
RealtyTrac's report came as little surprise to Watson Realty ERA agent Jesse Atondo, who says 10 to 15 local families come to him with mortgage problems every week.
"I'm not only a Realtor," Atondo said, "I'm a counselor now. These people come crying."
Much of Atondo's business is in Lamont, where he spends four or five evenings each week sitting in the McDonald's on Main Street, fielding requests for help from distraught homeowners.
Lenders and real estate agents took advantage of uneducated consumers, he said.
"There were a lot of Realtors that were encouraging -- especially Latino clients -- to buy houses they couldn't afford," Atondo said. "They've left a mess."
Lately, Bakersfield broker Mark Ponder has been working with troubled borrowers to skirt some of that mess.
The Westchester Realty owner has taken on a load of short sales -- a transaction in which a lender accepts a lower sales price on a home to rid itself of a problem mortgage.
"I've done more in the last six months than I have in my career," Ponder said.
Lenders have been quick to agree to a short sale because they recognize Bakersfield's market has stalled, he said.
Few could puzzle out why Bakersfield has been hit so hard with foreclosures -- beating out places like Los Angeles and Phoenix..
But local incomes may be a factor, said Michael O'Hare, the Central Valley Chapter President of the California Association of Mortgage Brokers.
"The California market has always been priced higher than what most people can afford," O'Hare said. "And it's been over the past few years that the only way to get people into properties was to go for these Alt-A, stated income loans."
With stated income loans, lenders bypass the inspection of wage amounts. Alt-A loans offer loan-to-value ratios higher than traditional, prime loans.
Valley wages and available jobs lag behind the rest of the state, O'Hare noted.
"People were put into these loans they really had no business being in," he said.
Investors may be contributing to today's cascade of foreclosures, but O'Hare suspects most with problem mortgages are average homeowners who live on their property.
RealtyTrac's numbers tally a variety of public records -- default notices, trustee's sales notices and bank owned properties -- filed once a homeowner has missed multiple mortgage payments.
Not everyone who receives one of these notices will lose a home to foreclosure, but options grow scarce when legal notices arrive in the mailbox.
Tim Cox, the owner of Crown Mortgage, says it takes at least three late mortgage payments before you get a notice of default. By then, "a mortgage lender won't help, you can't sell and there's (usually) not enough equity to refinance."
"I really think the only thing they can be offered is prayers, and the hopes this works out for them," Cox said.
Metro areas with the highest foreclosure rates
1. Stockton
2. Detroit/Livonia/Dearborn, Mich.
3. Las Vegas/Paradise, Nev.
4. Riverside/San Bernardino
5. Sacramento
6. Denver/Aurora, Colo.
7. Miami, Fla.
8. Bakersfield
9. Memphis, Tenn.
10. Cleveland/Lorain/Elyria/Mentor, Ohio
Source: RealtyTrac