(Sub)Primed for Foreclosure

From the SF Chronicle:

As many as 2.2 million Americans with subpar credit could lose their homes through foreclosure over the next several years, a new report said. California will see some of the sharpest increases in foreclosure rates among what are known as subprime borrowers because the deflation of the housing market here is making it increasingly difficult for distressed homeowners to sell or refinance....

The number of subprime loans has jumped over the past five years in California as the housing boom drew people into the market who were counting on rapid price appreciation to pay down debt.

From the Sacramento Bee:

As an unprecedented housing boom ebbed this year, consumers with blemished credit histories increasingly fell behind on costly mortgages -- faltering under the weight of monthly payments that adjust upward and prepayment penalties that block an escape.

Now, a North Carolina-based lending policy group contends that 21 percent of so-called "subprime" loans taken out in 2006 by Sacramento-area borrowers are likely to end in foreclosure and aggravate an already flat housing market. The nonprofit Center for Responsible Lending, in a report released Tuesday, estimated that, by comparison, just 4.8 percent of the people who took subprime loans before the housing boom, between 1998 and 2001, experienced foreclosure.
...
However, DataQuick Information Systems analyst John Karevoll and other real estate experts say rising subprime foreclosures are likely to affect housing values in a limited number of neighborhoods, rather than in the region as a whole.
...
The Center for Responsible Lending said it couldn't immediately determine the actual number of subprime loans taken during the first nine months of 2006 in the Sacramento region. But 2005 brought 26,800 subprime home loans to the region, according to another nonprofit subprime lending analyst, the San Francisco-based Community Reinvestment Coalition.
...
A fall in California housing prices has also aggravated such loans, preventing people from selling the house to get out of trouble. "If the loans are less than a year to 18 months old, there's limited equity for them to refinance," said Pam Canada, executive director of Sacramento-based Neighborworks Homeownership Center, which advises people on how to buy homes and keep them. "That's what they've always done to prevent foreclosure."

One more. From the Central Valley Business Times:

Holders of so-called "subprime" mortgages are in danger of losing their homes, especially in the Central Valley, according to a report from the Center for Responsible Lending. As much as $164 billion in mortgages is at risk due to foreclosures in the subprime mortgage market, it says.

With 25 percent of the mortgages issued this year being subprime, Merced County ranks as the nation’s most risky area for foreclosures, according to the report. Other Central Valley areas are not much better, it says. Bakersfield ranks second in the nation; Fresno is fifth; Stockton is seventh and Visalia-Porterville is 13th. In contrast, Yuba City ranks 152; Sacramento 28; Modesto 205; Madera 29; and Hanford-Lemoore, 152.

"We project that one out of five (19 percent) subprime mortgages originated during the past two years will end in foreclosure. This rate is nearly double the projected rate of subprime loans made in 2002, and it exceeds the worst foreclosure experience in the modern mortgage market, which occurred during the 'Oil Patch' disaster of the 1980s," the report says.

You can find the report here [pdf].