DQNews’ last quarter report had some pretty interesting numbers on mortgage statistics in California.  In the report, mortgages that were made during the height of the market, or at their peak price, proved to be harder for lenders to work out. Due to the higher loan amounts and lower home equity, loan modifications and general negotiations were more difficult to work out with these struggling borrowers. In addition, multiple financing was at an all time high during this peak period. Unfortunately, this only adds further difficulty as lenders need to cooperate with each other to reach an agreement.

While the mortgage default filings did drop in California, many of the troubled mortgages were found to be originated from October 2005 to February 2007. Another interesting statistic was that of those homeowners in default; only 20 percent were able to escape the foreclosure process by refinancing, selling, or bringing their payments current. A year ago, this number was at 46 percent, and these peak-time purchases are likely responsible for the significant drop in numbers. While lenders and programs are working towards helping homeowners throughout the nation, the peak time purchases in California just don’t give lenders enough room to work with.

Of those in default, DQNews also found that California borrowers were on average 5 months behind on their primary mortgage and 8 months behind on home equity loans or lines of credit.  At the time, multiple loan financing peaked in 2006, accounting for almost 61 percent of all home purchases. As of right now, with credit markets tightened, multiple loan financing accounted for only 6.5 percent of purchases in California.

For those of you currently in the market for a home in California, it’s definitely tough to predict the best times to buy; and I know most of you are shooting for prices to hit rock bottom. But, one thing we can see from mortgages made in the past is that you need to make sure you aren’t getting in over your head. Granted that credit guidelines are more strictly enforced nowadays, it is always in your best interest to make sure you consider all the possibilities. This could include adjusting interest rates, slipping home prices, or various financial emergencies. By taking all of this into account, you stand a much better chance of dealing with any unknowns in the future. Of course, you can’t prepare for everything, but typical loan guidelines are calculated to give you some breathing room in case something does happen. Unfortunately for the folks who bought during the peak prices in California, one can only hope they find a way to manage with today’s struggling housing market.

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