Tax Relief Measures for Strapped Homeowners Facing Foreclosure or Bankruptcy Advances in House.

WASHINGTON (AP) -- Financial relief for homeowners facing foreclosure or in bankruptcy advanced in the House Thursday when the House approved legislation to help financially strapped homeowners.

The bill, passed by a 386-to-27 vote, would give a tax break to homeowners who have mortgage debt forgiven as part of a foreclosure or renegotiation of a loan. No taxes would be owed on the value of any debt forgiven or written off. Currently such debt forgiveness is taxable income.

While the measure is anticipated to reduce taxes of some strapped homeowners by $650 million, the cost to the government would be offset in part by limiting a tax break available on the sale of second homes.

"Families dealing with the pain of a foreclosure should not have the 'double whammy' of a large tax bill," Rep. Charles Rangel, D-N.Y., chairman of the House Ways and Means Committee and co-sponsor of the bill, said.

The House vote was the latest congressional reaction to a mortgage crisis touched off this spring by a blowup in high-priced home loans for risky borrowers, throwing a pall over the economy. Foreclosures are at record highs and late payments are spiking. Lenders have been forced out of business and investors have taken huge financial hits.

An estimated 2 million to 2.5 million adjustable-rate mortgages -- worth some $600 billion -- will jump from low initial "teaser" rates to higher rates this year and next. Steep prepayment penalties have made it difficult for some to get out of their mortgages, and some overstretched homeowners can't afford to refinance or sell their homes.

To help offset the $650 million in tax revenue, the legislation makes it harder to get breaks on capital gains taxes for the sale of second homes. The White House supports the measure but wants mortgage relief to be in effect three years, not permanent as approved in the House. President Bush also is opposed to limiting tax breaks on the sale of second homes.

The Mortgage Bankers Association expressed strong support for the bipartisan tax-relief bill but fiercely criticized another measure, opposed by Republicans on a House Judiciary subcommittee that narrowly approved passing it to the full committee.

That measure, which faces a contentious future in Congress, would revise the bankruptcy code to aid homeowners facing default and foreclosure. If enacted, it would further trim profits at hard-hit mortgage lenders.

The bill would allow judges to order mortgage lenders to ease terms for homeowners in bankruptcy proceedings. Currently, mortgage lenders can foreclose against a homeowner in default 90 days after a bankruptcy filing.

Mortgage lenders would be "terrified" of getting wrapped up in bankruptcy proceedings, said Brian Gardner, a research analyst with investment firm Keefe, Bruyette & Woods.

The MBA said in a statement: "Lenders will have no choice but to move to foreclosure right away to ensure that they are not covered by the onerous provisions of this bill. In the longer term, investors and speculators who overpaid for homes at the height of the housing bubble will have an incentive to file for bankruptcy, walk away from the loan and property, and reap an undeserved windfall."

Similar legislation -- on tax breaks and revising the bankruptcy code -- are pending in the Senate. Sen. Richard Durbin, D-Ill., proposes making the revisions permanent; Sen. Arlen Specter, R-Pa., is proposing a seven-year window for the changes.

The tax-relief bill is the Mortgage Forgivness Debt Relief Act H.R. 3648.

Record California Foreclosure Activity

October 26, 2007

La Jolla, CA.--Lenders started formal foreclosure proceedings on a record number of California homeowners last quarter, the result of declining home prices, sluggish sales and subprime mortgage distress, a real estate information service reported.

A total of 72,571 Notices of Default (NoDs) were filed during the July-to-September period, up 34.5 percent from 53,943 during the previous quarter, and up 166.6 percent from 27,218 in third-quarter 2006, according to DataQuick Information Systems of La Jolla.

Last quarter's default level passed the previous peak of 61,541 reached in first-quarter 1996. A low of 12,417 was reached in third-quarter 2004. An average of 34,781 NoDs have been filed quarterly since 1992, when DataQuick's NoD statistics begin.

"We know now, in emerging detail, that a lot of these loans shouldn't have been made. The issue is whether the real estate market and the economy will digest these over the next year or two, or if housing market distress will bring the economy to its knees. Right now, most California neighborhoods do not have much of a foreclosure problem. But where there is a problem, it's getting nasty," said Marshall Prentice, DataQuick's president.

Half the state's default activity is concentrated in 293 zip codes, almost all of which are in the Inland Empire and Central Valley. Grouped together, those zip codes saw year-over-year home price increases that reached 34.0 percent in first quarter 2005. Prices peaked in third-quarter 2006 at $399,000. Last quarter's median of $352,250 is 11.7 percent off that peak.

In the 1,172 other zip codes, appreciation peaked in second-quarter 2004 at 25.0 percent. Last quarter's median of $575,000 was 2.5 percent below the prior quarter's peak of $590,000.

Most of the loans that went into default last quarter were originated between July 2005 and September 2006. The median age was 18 months. Loan originations peaked in August 2005. The use of adjustable-rate mortgages for primary purchase home loans peaked at 77.8% in May 2005 and has since fallen.

Because a residence may be financed with multiple loans, last quarter's 72,751 default notices were recorded on 68,746 different residences.

On primary mortgages statewide, homeowners were a median five months behind on their payments when the lender started the default process. The borrowers owed a median $10,914 on a median $344,000 mortgage.

On lines of credit, homeowners were a median eight months behind on their payments. Borrowers owed a median $3,355 on a median $66,351 credit line. However the amount of the credit line that was actually in use cannot be determined from public records.

DataQuick, a subsidiary of Vancouver-based MacDonald Dettwiler and Associates, monitors real estate activity nationwide and provides information to consumers, educational institutions, public agencies, lending institutions, title companies and industry analysts. DataQuick provides online access to property information, including default notices. Notices of Default are recorded at county recorders offices and mark the first step of the formal foreclosure process.

The default numbers were a record in 39 of the state's 58 counties. In Los Angeles County it was 63.3 percent of the first-quarter 1996 peak.

On a loan-by-loan basis, mortgages were least likely to go into default in San Francisco, Marin and San Mateo counties. The likelihood was highest in Merced, San Joaquin and Riverside counties.

While numbers at the zip code level can fluctuate severely, among the zips with the biggest foreclosure problem are 95330 Lathrop in San Joaquin County, 92571 Perris in Riverside County and 95832 Sacramento.

Of the homeowners in default, just under half, 45.9 percent, emerge from the foreclosure process by bringing their payments current, refinancing, or selling the home and paying off what they owe. A year ago it was 80.9 percent. The increased portion of homes lost to foreclosure reflects the slow real estate market, as well as the number of homes bought during the height of the market with multiple-loan financing, which makes 'work-outs' difficult.

Trustees Deeds recorded, or the actual loss of a home to foreclosure, totaled 24,209 during the third quarter. That is the highest number in DataQuick's statistics, which go back to 1988. Last quarter was up 38.7 percent from 17,458 for the previous quarter, and up 604.8 percent from 3,435 for last year's third quarter. The peak of the prior foreclosure cycle was 15,418 in third-quarter 1996, while the low was 637 in the second quarter of 2005.

There are 8.4 million houses and condos in the state.

Grouped together, foreclosure properties in 293 hardest-hit zip codes resold for 11 percent less than non-foreclosure homes. In the rest of the state foreclosure resales were near or at the price levels of other sold properties, DataQuick reported.

Notices of Default
houses and condos

County/Region	2006Q3	2007Q3	%Chg
Los Angeles	5,565	13,583	144.1%
Orange	1,500	3,882	158.8%
San Diego	2,355	5,673	140.9%
Riverside	3,040	9,250	204.3%
San Bernardino	2,548	7,038	176.2%
Ventura	578	1,377	138.2%
SoCal*	15,676	41,062	161.9%
San Francisco	149	252	69.1%
Alameda	803	2,126	164.8%
Contra Costa	1,012	3,216	217.8%
Santa Clara	670	1,655	147.0%
San Mateo	290	581	100.3%
Marin	89	172	93.3%
Solano	510	1,513	196.7%
Sonoma	231	749	224.2%
Napa	43	163	279.1%
Bay Area	3,797	10,427	174.6%
Santa Cruz	103	267	159.2%
Santa Barbara	188	598	218.1%
San Luis Obispo	94	249	164.9%
Monterey	202	751	271.8%
Coast	587	1,865	217.7%
Sacramento	1,761	4,947	180.9%
San Joaquin	898	2,961	229.7%
Placer	443	728	64.3%
Kern	741	2,196	196.4%
Fresno	789	1,807	129.0%
Madera	106	320	201.9%
Merced	282	1,076	281.6%
Tulare	268	595	122.0%
Yolo	101	303	200.0%
El Dorado	120	278	131.7%
Stanislaus	631	1,909	202.5%
Kings	46	108	134.8%
San Benito	63	178	182.5%
Yuba	66	227	243.9%
Colusa	18	54	200.0%
Sutter	77	155	101.3%
Central Valley	6,410	17,842	178.3%
Mountains*	185	417	125.4%
North California*	563	958	70.2%
Statewide	27,218	72,571	166.6%
* includes additional counties

Recorded Trustees Deeds
houses and condos

County/Region	2006Q3	2007Q3	%Chg
LOS ANGELES	535	3,627	577.9%
ORANGE	179	1,280	615.1%
SAN DIEGO	453	2,157	376.2%
RIVERSIDE	478	3,462	624.3%
SAN BERNARDINO	232	2,255	872.0%
VENTURA	77	454	489.6%
SOCAL TOTAL*	1,960	13,314	579.3%
SAN FRANCISCO	22	66	200.0%
ALAMEDA	115	674	486.1%
CONTRA COSTA	119	1,159	873.9%
SANTA CLARA	51	410	703.9%
SAN MATEO	37	155	318.9%
MARIN	4	41	925.0%
SOLANO	63	495	685.7%
SONOMA	33	201	509.1%
NAPA	5	41	720.0%
BAY AREA TOTAL	449	3,242	622.0%
SANTA CRUZ	17	71	317.6%
SANTA BARBARA	29	211	627.6%
SAN LUIS OBISPO	21	75	257.1%
MONTEREY	20	266	1230.0%
COAST TOTAL	87	623	616.1%
SACRAMENTO	343	2,065	502.0%
SAN JOAQUIN	119	1,136	854.6%
PLACER	45	294	553.3%
KERN	66	729	1004.5%
FRESNO	78	483	519.2%
MADERA	9	110	1122.2%
MERCED	30	423	1310.0%
TULARE	21	167	695.2%
YOLO	12	96	700.0%
EL DORADO	13	110	746.2%
STANISLAUS	73	752	930.1%
KINGS	5	18	260.0%
SAN BENITO	5	62	1140.0%
YUBA	16	108	575.0%
SUTTER	12	58	383.3%
CENTRAL VALLEY TOTAL*	852	6,630	678.2%
MOUNTAINS*	19	113	494.7%
NORTH CALIF*	68	287	322.1%
STATEWIDE	3,435	24,209	604.8%
* includes additional counties

Source: DataQuick Information Systems

California Foreclosure Activity Continues to Rise

July 24, 2007

La Jolla, CA.--Lenders sent California homeowners the highest number of mortgage default notices in over a decade last quarter, the result of flat or falling prices, anemic sales and a market struggling with the excesses of the 2004-2005 home buying frenzy, a real estate information service reported.

Lenders filed 53,943 Notices of Default (NoDs) during the April-through-June period. That was up 15.4 percent from 46,760 for the previous quarter, and up 158.0 percent from 20,909 for second-quarter 2006, according to DataQuick Information Systems of La Jolla.

Last quarter's default level was the highest since 54,045 NoDs were recorded statewide in fourth-quarter 1996. Defaults peaked in first-quarter 1996 at 61,541. A low of 12,417 was reached in third-quarter 2004. An average of 34,172 NoDs have been filed quarterly since 1992, when DataQuick's NoD statistics begin.

"A lot of the loans that went bad last quarter were made at or just beyond the cycle's peak, between summer '05 and summer '06. Appreciation rates for most of that period were in the double digits and lenders let many households stretch their finances to the max, and beyond. It's that pool of 'beyond' mortgages that the market is working its way through," said Marshall Prentice, DataQuick's president.

Most of the loans that went into default last quarter were originated between July 2005 and August 2006. The median age was 16 months. Loan originations peaked in August 2005. The use of adjustable-rate mortgages for primary purchase home loans peaked at 77.8% in May 2005 and has since fallen.

Because a residence may be financed with multiple loans, last quarter's 53,943 default notices were recorded on 50,901 different residences, up 162.8 percent from 19,370 for second quarter 2006.

On primary mortgages statewide, homeowners were a median five months behind on their payments when the lender started the default process. The borrowers owed a median $11,126 on a median $342,000 mortgage.

On lines of credit, homeowners were a median eight months behind on their payments. Borrowers owed a median $3,457 on a median $67,121 credit line. However the amount of the credit line that was actually in use cannot be determined from public records.

DataQuick, a subsidiary of Vancouver-based MacDonald Dettwiler and Associates, monitors real estate activity nationwide and provides information to consumers, educational institutions, public agencies, lending institutions, title companies and industry analysts. DataQuick provides online access to property information, including default notices. Notices of Default are recorded at county recorders offices and mark the first step of the formal foreclosure process. Due to late data availability, statistics for Alameda County are extrapolated.

The default numbers reflect wide regional differences. The second-quarter numbers were a record in Riverside, Contra Costa, Sacramento and most Central Valley counties. In Los Angeles County it was still less than half the first-quarter 1996 peak, reflecting the depth of the recession in the mid-1990s, as well as the relative strength of today's housing market.

On a loan-by-loan basis, mortgages were least likely to go into default in Marin, San Francisco and San Mateo counties. The likelihood was highest in San Joaquin, Merced and Riverside counties.

The median price paid for a California home purchased between July 2005 and August 2006 was $460,000. Of those homes, the median price paid for those that went into default last quarter was $445,500, mostly because of low default rates at the high end.

Roughly half, 54.6 percent, of the homeowners in default emerge from the foreclosure process by bringing their payments current, refinancing, or selling the home and paying off what they owe. A year ago it was 88.0 percent. The increased portion of homes lost to foreclosure reflects the slow real estate market, as well as the number of homes bought during the height of the market with multiple-loan financing. In selling a home, all loans must be paid off, which is not the case in the formal foreclosure process, where second mortgages and lines of credit are most often written off.

Notices of Default
houses and condos

County/Region	2006Q2	2007Q2	%Chg
Los Angeles	4,586	10,393	126.6%
Orange	1,255	2,984	137.8%
San Diego	1,778	4,383	146.5%
Riverside	2,287	6,648	190.7%
San Bernardino	1,839	5,141	179.6%
Ventura	452	1,059	134.3%
SoCal*	12,271	30,828	151.2%
San Francisco	127	257	102.4%
Alameda	649	1,612	148.4%
Contra Costa	725	2,316	219.4%
Santa Clara	530	1,275	140.6%
San Mateo	222	463	108.6%
Marin	58	118	103.4%
Solano	350	1,065	204.3%
Sonoma	202	462	128.7%
Napa	47	128	172.3%
Bay Area	2,910	7,696	164.5%
Santa Cruz	73	155	112.3%
Santa Barbara	147	434	195.2%
San Luis Obisp	79	208	163.3%
Monterey	128	483	277.3%
Coast	427	1,280	199.8%
Sacramento	1,352	3,840	184.0%
San Joaquin	604	1,983	228.3%
Placer	276	627	127.2%
Kern	549	1,593	190.2%
Fresno	590	1,380	133.9%
Madera	92	215	133.7%
Merced	214	642	200.0%
Tulare	258	428	65.9%
Yolo	77	232	201.3%
El Dorado	86	222	158.1%
Stanislaus	407	1,286	216.0%
Kings	50	75	50.0%
San Benito	33	122	269.7%
Yuba	45	171	280.0%
Colusa	14	39	178.6%
Sutter	56	109	94.6%
Central Valley	4,703	12,964	175.7%
Mountains*	155	328	111.6%
North Calif*	443	847	91.2%
Statewide	20,909	53,943	158.0%
* includes additional counties

Trustees Deeds recorded, or the actual loss of a home to foreclosure, totaled 17,408 during the second quarter. That is the highest number in DataQuick�s statistics, which go back to 1988. That was up 57.8 percent from 11,032 for the previous quarter, and up 799.2 percent from 1,936 for last year�s second quarter. The prior peak of foreclosure sales was 15,418 in third-quarter 1996, the low was 637 in the second quarter of 2005.

There are 8.4 million houses and condos in the state.

While foreclosures tugged property values down by almost 10 percent in some areas eleven years ago, their effect in most markets today is still negligible. However, the continued rise in NoDs means that the number of homes lost to foreclosure will continue to increase in the second half of this year. Foreclosure levels are already high in certain Inland Empire and Central Valley markets, where the worst-hit neighborhoods might already be seeing property values eroded somewhat by foreclosures, DataQuick reported.

Recorded Trustees Deeds
houses and condos

County/Region	2006Q2	2007Q2	%Chg
Los Angeles	287	2,581	799.3%
Orange	110	821	646.4%
San Diego	292	1,714	487.0%
Riverside	281	2,509	792.9%
San Bernardino	137	1,489	986.9%
Ventura	37	316	754.1%
SoCal Total*	1,152	9,504	725.0%
San Francisco	9	49	444.4%
Alameda	69	480	595.7%
Contra Costa	62	778	1154.8%
Santa Clara	38	256	573.7%
San Mateo	17	97	470.6%
Marin	6	25	316.7%
Solano	36	324	800.0%
Sonoma	18	163	805.6%
Napa	3	34	1033.3%
Bay Area Total	258	2,206	755.0%
Santa Cruz	13	46	253.8%
Santa Barbara	16	137	756.3%
San Luis Obispo	4	52	1200.0%
Monterey	8	154	1825.0%
Coast Total	41	389	848.8%
Sacramento	175	1,662	849.7%
San Joaquin	64	785	1126.6%
Placer	29	220	658.6%
Kern	25	533	2032.0%
Fresno	40	402	905.0%
Madera	6	55	816.7%
Merced	7	240	3328.6%
Tulare	17	142	735.3%
Yolo	1	103	10200.0%
El Dorado	4	89	2125.0%
Stanislaus	36	522	1350.0%
Kings	7	27	285.7%
San Benito	5	38	660.0%
Yuba	4	84	2000.0%
Sutter	10	57	470.0%
Central Valley Total*	430	4,969	1055.6%
Mountains*	8	90	1025.0%
North Calif*	47	250	431.9%
Statewide	1,936	17,408	799.2%
* includes additional counties

Source: DataQuick Information Systems