Riverside Foreclosures Increase: How to Protect Yourself

DataQuick Information Systems, a company that monitors trends and data in real estate, identified Riverside County as one of three counties in the state with the most at-risk mortgages vulnerable for foreclosure.

During fourth quarter of 2006, 4,528 default notices were sent to property owners in Riverside County, which is an astounding 182 percent increase over the same period a year earlier. The number of default notices sent out statewide numbered 32,273, which is the highest recorded number since the third quarter of 1998.

Interestingly, inland-area property values have continued to inch upwards in the last year, according the California Association of Realtors. The November median price of a home in the Riverside-San Bernardino area was $401,460 – 4 percent more than in November 2005, CAR reported. However, home and condo sales plunged 46 percent over the same 12-month span.

A major factor contributing to the increase in foreclosure activity is the prevelance of borrowers who got into short-term ARMs in which they (or their loan) officers overstated their income enabling them to qualify for more home than they could really afford.

Likewise, the increasing number of complex and/or misleading loans is also to blame. For example, many banks offer 5-year negative amortization Option ARMs with a 1% start rate amortized over not 30, but 40 years. The borrower believes they have a fixed minimum payment for 5 years, when in fact their loan will "re-set" in just 2 to 3 years.

One wonders how the banks can offer such loans? Most banks state in the fine print that the loan will reset at 5 years OR if the loan reaches 110% of the original principle. Often times the actual interest rate is so high much higher than the minimum payment that borrowers can accumulate $20,000+ in deferred interest per year. Not all Option ARMs are at risk. There are other lenders who allow the loan to reach 125% or 10 years before the loan resets. A borrower in a loan with these terms is in a fairly safe position.

These recent trends underscore the importance of working with a reputable mortgage broker that is qualified to accurately assess your situation and put you in the most appropriate loan. There are loan programs available that offer both low mortgage payments and long-term stability.

If you feel you may be at risk and you'd like a free analysis of your situation, give me a call at (800) 975-8130 or email me at loanguru@altruityfunding.com.

- Jeremy Kossen