Although it is fortunate the Silicon Valley region has not been hard hit with foreclosures in comparison with the rest of the state, a California real estate and tax attorney believes foreclosures will be with us for some time.
Pamela Simmons, an attorney with the law office of Simmons & Purdy in Soquel, told Realtors at a recent Silicon Valley Association of REALTORS® tour meeting the number of California homes going into foreclosure continues to increase as the market works its way through declining home values and a pool of at-risk mortgages. According to DataQuick Information Systems, Trustees Deeds recorded, or the actual loss of a home to foreclosure, totaled 47,171 during the first quarter of 2008, up 327.6 percent from 11,032 in the same period last year.
Simmons started seeing the first flow of cases pertaining to foreclosures about a year and a half ago. Those impacted in this first wave were homebuyers "who had no business buying a home in the first place," she said. These were people without steady jobs, who were targeted by predators with offers of zero down payment loans. She indicated these homebuyers have lost their homes.
Included in the second wave of foreclosures are homebuyers impacted by subprime borrowing, many of whom entered into loan agreements with adjustable interest rates. Those rates have now adjusted upwards and the homebuyers cannot keep up with the higher house payments.
Today, Simmons is seeing more of the third wave of foreclosures - homeowners with negative amortization loans. Included here are homeowners who could not afford their debt and took out too much equity from their home. Some of these homeowners have payments that have increased by as much as $3,000 a month. Homeowners with multiple properties, popularly known a "flippers," also belong in this third group.
"It's like playing musical chairs and the music has stopped and these people are left without a chair," Simmons said.
Simmons explained the difference between a judicial foreclosure and a non-judicial foreclosure. Judicial foreclosures are processed through the courts, beginning with the lender filing a complaint which will state what the debt is, and why the default should allow the lender to foreclose and take the property given as security. If the court finds the debt valid, it will issue a judgment for the total amount owed, including the costs of the foreclosure process. After the judgment has been entered, a writ will be issued by the court authorizing a sheriff's sale. Since this process can entail as much as $100,000 in costs to a lender, virtually all of the foreclosures in California are conducted through the non-judicial foreclosure process.
Non-judicial foreclosures are processed without court intervention. Simmons said if a lender chooses this route, the lender cannot seek a deficiency judgment for the loss the lender suffers.
These days, cases involving lenders going after homeowners for misrepresentations on loan applications and lenders going after agents and brokers are on the rise as well, Simmons said.
She said, at least for much of the state, "I see a continuing market for people losing their homes."
The Silicon Valley Association of REALTORS® urges homeowners who anticipate falling behind on their payments to seek help immediately by calling 888-995-HOPE (or visit www.995HOPE.org). This toll-free, confidential hotline is sponsored by the Homeownership Preservation Foundation, which offers free advice and counseling to homeowners.
The Silicon Valley Association of REALTORS® (SILVAR) is a professional trade organization representing over 4,000 REALTORS® and Affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.
The term "REALTOR®" is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and who subscribes to its strict Code of Ethics.
Variations of this article have appeared in local area newspapers.
For further information, please email or call the SILVAR office at (408) 200-0100.