The field of research had concentrated recently on the undeniable foreclosure rates experienced nationwide. Out of many research conducted to examine the geographic and demographic dimensions of skyrocketing foreclosures in California and the characteristics of the foreclosed properties, Center for Responsible Lending was the first one to give in-depth findings. The findings were summarized as follows:

Surprisingly, foreclosure rates differ significantly per race (color). In California, the number of foreclosures is way higher on Latino and African-American borrowers than on non-Hispanic white borrowers. The foreclosure rates for Latino and African-American borrowers are 2.3 and 1.9 times higher, respectively. Approximately half of all California foreclosures are due to Latino borrowers. This can be attributed to the fact that a large number of loans are given to Latinos in those years.

Aside from races, the rates also differ per location. The volume of foreclosures (taking into account the number of foreclosures per area) is highest in major cities, such as Los Angeles while the concentrations of foreclosures (taking into account the number of foreclosures) are highest in Central Valley and Inland Empire. Thus, geographically and demographically, the concentration and volume of foreclosures differ drastically by region in California.

Lastly, foreclosure rates differ on the type of house subjected to mortgage. Most foreclosures are spreading on modest properties rather than on McMansions, which is somewhat unexpected because modest properties were typically valued significantly below median values.

Now a question arises on why are the foreclosure rates on Latino and African-American borrowers than on non-Hispanic white borrowers? One is required to look at the recent trends on the employment rate and purchasing power of the two groups, and at the current stability of the mortgage market in the economy. Research found out that the two groups experience an increase in their purchasing power this year. However, it wasn’t examined thoroughly if this increase is due to the declining unemployment rate or to the increase in their population. If the increase in purchasing power is due to the lowering unemployment rate, thus, it must lead to a decrease in foreclosure rates. However, high foreclosure rates suggest that the increase in purchasing power must be due to the increasing population, for the problem in mortgage delinquencies are unresolved by the increase in purchasing power. Also, the Latinos and African-American borrowers may be just another victim of the shaking mortgage market.

CRL’s latest research not only offers some useful facts but also offers some remedies to these foreclosures. The recommendations were as follows:

First, the credit bureaus are asked to review the loan modification applications before attempting any foreclosure. Also, principal reduction into loan modification programs must be integrated and housing counseling agencies and legal aid providers must be supported. Lastly, judicial modification of mortgages by bankruptcy judges must be banned.

These recommendations do not only offer short-term remedies but also long-term remedies that will surely help borrowers while the stubborn high unemployment rate is still not over.

Similar to many of the states throughout the US foreclosures in California have steadily increased until they are now considered to be at crisis levels. Although some banks have put in place plans to impose moratoriums on foreclosures by modifying loans for home owners who might be in danger of falling into foreclosure, other home owners who do not have mortgages with these banks are still going to be in hot water, as not everyone fits under the same plan.

In California home equity dips have affected between 29 and 34.5% of home owners. This means that these home owners have minimal if no and even negative equity in their property. Negative equity is one of the major stimulants for foreclosures to occur. Anyone facing any kind of economic crisis and with negative equity in their mortgage will have far less of an option if they need financial assistance to help them through the crisis. This leads to them being unable to meet their mortgage payments, they fall into default and eventually foreclosure is inevitable.

Foreclosures in California include hot spots such as Sacramento, however only 17% of home owners who purchased property in 2008 are in a position of negative equity, while 68% of home owners who purchased property in 2006 are in positions of negative equity. The rates of negative equity are not evaporating as quickly as in hot spots such as Bakersfield where homeowners who purchase property this year were in a state of negative equity to the tune of 31%. This means that 31% of the people who purchased homes in Bakersfield this year could face foreclosure action in the forthcoming months if they do not do something now about their negative equity position.

The composition of the property market has changed quite substantially. As there are so many foreclosures on the market at discounted prices, investors and new home buyers alike are taking advantage of this market. In order to stem continual losses some home owners are prepared to sell their property at greatly discounted prices. This stops the foreclosure process and allows the home owner to at least save their credit record. Effectively three quarters of the houses owned nationwide have dropped in value and some to the tune of as much as 40%.

In some instances, foreclosures in California have the low down payment to thank for the situation. For instance in Visalia the median down payment rate is 5%, while in El Centro it is as low as 1.6%. This means that at the outset the homeowner has no equity in the home, and with the value of property dropping, this makes the loom of a pending foreclosure in a crisis situation even more realistic.

It is not all bad news though; foreclosures in California have created a situation where new buyers are able to enter the market and purchase houses that they might not normally have been able to afford.

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This bill is in an attempt to spur on the economy of California as they have seen housing prices drop by as much as 40% this year. Although this might be a belated effort, it will certainly be welcome to troubled borrowers who are presently in the throes of foreclosure and wanting to hold onto their homes. All the governor still has to do is push the bill through legislature and turn it into law so that lenders will deliver this relief to home owners.

The bill would include that during the next four years, lenders would have to wait 90 days longer before being able to sell the home of a mortgage defaulter. It offers more time to both the lender and the defaulter to stop foreclosures and would require the negotiation of more favorable mortgages. Similar to the FDCI approach of temporary interest cuts and other techniques in the IndyMac Bank fiasco, lenders would have to take this approach and they will be encouraged to rework loans on a large scale in order not to incur large write off debt. Interestingly one of the paradoxes that have led to this entire foreclosure fiasco is because lenders have been unable to have time enough to contact borrowers to offer a lifeline.

The plus side of this bill is that it will allow immediate relief to homeowners and forestall many foreclosures for sale in California. While both lenders and borrowers will have to withstand some pain in the long run, this will also lessen any unfairness to any borrowers who have not defaulted on their mortgage payments.

In the meantime though, the market is still wide open to investors and new buyers who would like to take advantage of the large discounts that can be enjoyed by investing in foreclosures for sale in California. Already lenders have huge inventories of these properties on their books and as non-performing assets, they cannot afford to hold onto them for long periods of time. Lenders regularly hold auction sales to sell of these properties in bulk and listing services are also able to supply investors and new home buyers with listings of foreclosures for sale in California.

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