About 1 in 10 Californians with a home loan is now in default, and there’s growing evidence that the mortgage meltdown is spreading to commercial real estate.
The home mortgage delinquency rate — the percentage of borrowers who have missed several payments and are in the first stage of foreclosure — climbed in June to 9.5% in California and 9.9% in Los Angeles County, according to First American CoreLogic.
The staggering number of home mortgage defaults probably will lead to large numbers of foreclosures through at least this year, housing experts say.
"It’s probably a given we’ll see a high number of foreclosures in the next couple of quarters due to the level of defaults plus the recession and jobs lost. There’s plenty more pain to come," said Andrew LePage, an analyst for real estate research firm MDA DataQuick of San Diego.
The rumblings continue in commercial real estate:
"There’s no question we’re going to see more commercial properties end up in restructuring; the question is how much," said Dan Fasulo, managing director of Real Capital Analytics, a New York research firm.
Fasulo said lenders are trying to avoid foreclosures on commercial properties partly because they don’t want to take on properties they would have trouble selling.
"They’re saying, ‘If we foreclose now, what are we going to do with it?’ This is the worst market to sell property in modern times."
Lenders have been making allowances to upside-down borrowers, hoping to keep from foreclosing long enough for commercial real estate values to recover, Fasulo said. There’s now a popular street term for the practice, he said: "extend and pretend."