Central Valley

Valley home default rates decline

Finally there's some good news on the foreclosure front: Northern San Joaquin Valley mortgage default rates seem to be stabilizing.

After nearly two years of staggering increases, the number of homes issued notices of default, the first step toward foreclosure, was lower in May than in April or March.

There were significant declines in San Joaquin and Merced counties, while Stanislaus County defaults held about steady, according to statistics released Wednesday by the Web site ForeclosureRadar.com, which tracks every default, auction and foreclosure in California.

During May, 3,333 mortgages went into default in the three counties, compared with 3,676 in April and 3,668 in March.

"The region definitely is stabilizing. It's stabilizing at a pretty high level, however," said Sean O'Toole, who founded and runs ForeclosureRadar. He said the three counties were among the first in California to enter the foreclosure crisis. "Now I think you're leading the way out."

That would be welcome relief for the region's depressed housing market, considering home values have plummeted more than 50 percent in some valley cities since 2005. New home construction has slowed to a trickle as foreclosed houses repossessed by banks have flooded the resale market.

"The banks still are taking back more inventory than they're able to resell," O'Toole said. Homes typically aren't repossessed by lenders, via foreclosure auctions on the courthouse steps, until about 145 days after the notice of default is filed.

Last month, 2,350 houses were foreclosed on in the three counties, including a record-high 817 in Stanislaus.

"It's not just people with subprime loans losing their houses any more," said Martha Lucey, president of ByDesign Financial Solutions, which receives federal funds to provide foreclosure prevention counseling.

Lucey said even homeowners with fixed-rate loans can face foreclosure if they encounter financial problems -- such as an illness, divorce or job loss -- because home values have declined so much they have no equity and can't sell for what they owe.

'It's starting to turn around'

Mortgage lenders, however, have become more cooperative in working with troubled borrowers, according to Peter Kovacs, branch manager for Guild Mortgage Co. in Modesto. He said he's hearing about more and more homeowners whose mortgages have been modified by lenders to enable them to avoid foreclosure.

"There is reason for optimism," Kovacs said. "It's a big ship to turn around, but it's starting to turn."

Edward Parcaut, president of SourceOne Financial in Modesto, said he also has heard about banks that have reduced the debt some borrowers owe.

But Parcaut said many homeowners simply choose to walk away from their house, letting it fall into foreclosure.

"They're making a business decision. I've never seen so much detachment," Parcaut said about homeowners who accept foreclosure without shame. "The stigma is gone."

Parcaut and Kovacs have been active in a community group called No Homeowner Left Behind-Central Valley, which organizes foreclosure prevention workshops in Modesto.