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California Home-Loan Defaults Rise as Unemployment Lingers Close to Record

October 26, 2010, Nadja Brandt, Bloomberg

California home-mortgage defaults climbed 19 percent in the third quarter from the previous three months as the state's unemployment rate lingered close to a three-decade high, MDA DataQuick said.

Homeowners in the most-populous state received 83,261 default notices, up from 70,051 in the second quarter, the San Diego-based research company said today in a statement. Defaults fell 26 percent from a year earlier.

California's unemployment rate was 12.4 percent in September, the U.S. Labor Department said on Oct. 22. That's close to the 12.6 percent record reached in March, according to agency, whose data goes back to 1976. The U.S. jobless rate held at 9.6 percent.

Mortgage defaults were higher in California's less- expensive areas. Neighborhoods with median home prices of less than $200,000 had 14.4 defaults for every 1,000 homes, compared with 2.7 defaults per 1,000 in areas with prices of at least $800,000, MDA DataQuick said.

Defaults reached a peak in California in the first quarter of 2009, when 135,431 notices were filed, said the data provider, a unit of Richmond, British Columbia-based MacDonald, Dettwiler & Associates Ltd.

The third-quarter data precedes the impact, if any, of foreclosure suspensions by loan servicers such as Bank of America Corp., Ally Financial Inc. and JPMorgan Chase & Co. after allegations they used "robo-signers" to push through repossessions without verifying documentation.

'Steady' Processing

"Over the past year, with some minor ups and downs, financial institutions and their servicers have been processing a fairly steady number of defaults each quarter," MDA DataQuick President John Walsh said in the statement. "That probably has more to do with their capacity to process defaults than with higher or lower levels of incoming distress."

Default notices, filed at county recorders' offices, are the first step in foreclosing on a home. A homeowner can halt a foreclosure by catching up on payments, refinancing or selling the property.

Countrywide Financial Corp., now owned by Bank of America, originated the most California loans that went into default in the quarter, MDA DataQuick said. It was followed by Bank of America; World Savings, now part of Wells Fargo & Co.; Wells Fargo; and Washington Mutual, acquired by JPMorgan in 2008.

Those lenders were the most active in 2006, according to the data company. The median origination date for the third quarter's defaulted loans was August 2006.

MDA DataQuick compiles its surveys using county records and supplies real-estate information to customers including public agencies, lenders and title companies.