A record-breaking 3,000 homes were lost to foreclosure during July in the Northern San Joaquin Valley, pushing the 12-month foreclosure total to more than 20,000 homes.
Mortgage defaults on those properties cost lenders about $1.1 billion in July, according to statistics released Tuesday by ForeclosureRadar, a real estate research group.
Stanislaus County had one of the biggest jumps in foreclosures: 1,053 properties with outstanding loans of more than $440 million went to auction on the courthouse steps during July.
Only 39 of those Stanislaus homes attracted bids. Lenders got stuck with the remaining 1,014 of them, which they must try to resell. More than 7,000 homes have been foreclosed on in the county during the past year.
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San Joaquin County lost 1,357 homes to foreclosure auctions in July, with all but 36 going back to lenders. Merced County lost 603 homes to foreclosure, with only eight selling at auction.
Statewide, 28,795 properties with a combined loan balance of $12.55 billion were foreclosed on during July.
"We're going to see even more foreclosures this month," predicted Sean O'Toole, founder of ForeclosureRadar, which tracks every California foreclosure. "The lenders still just have their heads in the sand."
O'Toole said mortgage companies continue to be unrealistic in dealing with borrowers because they haven't accepted how bad the real estate market is in places like the Northern San Joaquin Valley.
What's triggering many of the valley's foreclosures, O'Toole said, is the dramatic decline in home values.
Many parts of Stanislaus, Merced and San Joaquin counties have had median home sales prices plummet 50 percent or more since the housing boom peaked in 2005. Home prices are back to about what they were in early 2003, which means many homeowners owe more than their homes are worth.
"If you didn't have declining prices, then people could just sell their home or refinance to avoid foreclosure," O'Toole explained.
So, many homeowners are trapped and some simply give up.
"We keep hearing about people who can afford to pay their mortgage, but who walk away instead," said Brad German, a spokesman for Freddie Mac. Fannie Mae and Freddie Mac are the government-sponsored companies that together hold or guarantee more than $5 trillion in home mortgages.
Even though being foreclosed on will damage someone's credit for seven years, German said, some homeowners don't seem to care.
"A mortgage is a legal contract," German stressed. "It's not an option you can walk away from based on whether a home appreciates in value."
German said there are persistent stories about people who let one home be foreclosed on right after they purchase a second home.
"It is very concerning and it's fraud," said German, noting that some buyers misrepresent their intentions and their creditworthiness. "When people voluntarily leave their homes, they add more houses to the inventory. It also causes tighter lending standards, which makes mortgages harder to get."
In the long run, German said, homeowners are better off working with their lenders to avoid foreclosure.
"Seven years of bad credit is a long time, not only in the life of a family, but in the real estate cycle," German said.
"Ultimately, home prices are going to go back up," said Rep. Jerry McNerney, D-Pleasanton. While that may take five years or more, McNerney said, homeowners can take advantage of new federal legislation to help them refinance.
"We're going to be as loud and as obnoxious as we can to tell people there are options, and they have to make use of them," McNerney said.
The congressman said lenders and borrowers must stop pointing fingers at each other about who is to blame. Instead, he said he believes they should work together to refinance the loan, lower the amount owed by 15 percent and take advantage of new government loan guarantees.
"This is the best of all options," McNerney said.
His office has joined other elected officials and community groups around the valley to organize foreclosure prevention workshops. Homeowners can get free counseling and meet privately with their lenders at those events.
"At least we're trying to give people hope," said Teresa Kinney, a member of the staff of Rep. Dennis Cardoza, D-Merced. She has helped organize seven foreclosure workshops the past six months.
At one June event in Modesto, Kinney said more than 35 homeowners had their loans modified by Countrywide Home Loans. She knows that's not many, considering how many people have lost their houses to foreclosure.
"We're not going to be able to save everyone because, frankly, there are people out there who lied (on their mortgage applications)," Kinney said. "They have to deal with the consequences of that."