Record foreclosures of homes in county

An unprecedented number of Sonoma County homeowners are falling behind on their mortgages and losing their homes as the region's foreclosure crisis worsens, according to a new report.

In the first quarter, lenders sent a record 1,392 default notices to Sonoma County homeowners who had stopped making their mortgage payments, according to DataQuick Information Systems, a real estate research firm.

Mortgage defaults have more than tripled in the past year -- up from 407 in the first quarter of 2007 -- and jumped 44 percent in just the past three months. In the fourth quarter, lenders sent 968 default notices, the first step in the foreclosure process.

Only two other California counties -- Merced and Colusa -- experienced a sharper jump in mortgage defaults over the past year, when measured by the percentage increase.

Every week, lenders seize 41 homes from Sonoma County borrowers who have stopped paying their mortgages, almost double the number from three months ago. Overall, lenders took back 538 homes during the first quarter, up from 298 in the fourth quarter and 94 a year ago.

A record number of Californians are losing their houses as home values tumble and mortgage payments increase on high-risk loans issued near the peak of the housing boom.

"The big 'if' right now is whether or not the economy is in recession. If it is, the foreclosure problem could spread beyond the current categories of dicey mortgages, and into mainstream home loans," said Marshall Prentice, DataQuick's president.

Under the best-case scenario, defaults will rise over the next six months and then begin to come down, said John Karevoll, DataQuick analyst.

"It's probably going to get worse," he said.

A growing number of Sonoma County homeowners face losing their homes as the region's housing downturn worsens and unemployment rises, said real estate agents and economists.

"This number is expected to grow into June. It is my understanding that this will result in the largest foreclosure rate to date," said David Rendino, a Rohnert Park agent who sells lender-owned homes in several Bay Area counties.

Falling property values are the primary factor for a default, which occurs when a borrower misses a mortgage payment. That affects a homeowner's ability to refinance or sell, Karevoll said.

"The main trigger right now appears to be if properties in an area are going down in value and by how much. That coincides very, very closely with the likelihood of foreclosure," he said.

Homeowners who are most vulnerable bought around the market's peak nearly three years ago and relied on loans with low initial payments that explode when high interest rates kick in. The most popular were loans with fixed lower payments for the first two to three years, and payment-option mortgages featuring minimum monthly payments.

"A lot of the foreclosure activity is happening because of adjusting interest rates. People are unable to afford the monthly payment. The other thing is that as people lose jobs, there's generally an increase in foreclosures," said Robert Eyler, director of the Center for Regional Economic Analysis at Sonoma State University.

Some homeowners may be able to negotiate with lenders. Others might walk away from homes unless they can sell, agents said.

Homeowners who can't refinance because they owe more than their home is now worth must sell to avoid foreclosure. This is flooding the market with distressed properties, driving down the price of adjacent houses and the county's median price, the most widely watched barometer of home values.

Home sales overall continue to dip to levels not seen in more than a decade. The price for the typical Sonoma County house has fallen nearly 29 percent since the market's peak.

"Foreclosures certainly will continue to hurt the housing market," Eyler said.

Of the homes sold in Sonoma County in March, 29 percent had been in foreclosure at some point in the past year, according to DataQuick. Statewide, 38 percent of homes sold last month were in foreclosure at some point in the past year and 24 percent of the sales in the Bay Area.

Only a third of the homeowners in default will emerge from the foreclosure process by bringing their payments current, refinancing, or selling the home and paying off what they owe, DataQuick estimated. A year ago, just over half of the homeowners in default were able to hold onto their homes.

Most of the loans that went into default in Sonoma County last quarter were originated between July 2005 and August 2006. The median age was 27 months.

On primary mortgages, Sonoma County homeowners were a median five months behind on their payments when the lender started the default process. The typical borrower had missed $12,811 in payments and owed $416,000 on their mortgage.

Overall, lenders began foreclosure proceedings on 110,392 homes in California in the first quarter, or 1.4 percent of the state's 7.9 million homes and condos.

You can reach Staff Writer Michael Coit at 521-5470 or mike.coit@pressdemocrat.com.