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County: Defaulted properties double

The number of defaulted properties in Nevada County has doubled in the past year, according to figures from the county recorder’s office.

Since January lenders have issued 253 notices of default in the county. That’s up from last year, when lenders issued 124 notices during the same time period, according to recorded documents.

In the county, 282 homes are in some phase of foreclosure, bank ownership or sale, according to RealtyTrac, an online marketplace at http://www.realtytrac.com for foreclosure properties. Despite that increase, local mortgage officers said Monday rates have not reached a worrisome level in Nevada County.



“Conventional wisdom is that we won’t have as many foreclosures here as in other places in the state because of the dynamics of who buys here,” said Chauncey Poston, president of the Nevada County Board of Realtors and a Grass Valley councilman.

That’s because most people who buy homes in Nevada County typically have sold homes elsewhere and have the money for a large down payment, he said.




“In the grand scheme of things, (the current level is) not an alarming rate,” said John Taber, a commercial and residential loan officer with Delta Home Loans. He said Nevada County is faring better than other counties in the state.

Nationwide problem

Placer County has 3,086 homes in some phase of foreclosure, bank ownership or sale, and Yuba County has 567 such listings, according to RealtyTrac.

Nationwide, lenders filed 164,644 foreclosures in June, up 87 percent over June 2006, RealtyTrac reported.

The troubled property owners are not exclusively first-time buyers or young families. In some cases, owners of upscale homes “got in over their heads” and had to foreclose on their property, according to Realtor Cheryl Rellstab.

“The link to foreclosures is almost always a job loss,” Poston said.

California has the nation’s second-highest foreclosure rate among states, with one foreclosure filing for every 315 households.

Foreclosure notices in The Union classifieds have grown by four times and 18-20 notices a month are not uncommon this summer, compared with five notices last year. Most of the foreclosure properties come after two to three years of ownership.

Dangerous mixture

The high rate of repossessed homes stems from a combination of a buyer’s frenzy several years ago, when buyers were willing to do anything to get into a home before prices rose beyond their reach, and loans with creative financing and adjustable “teaser” rates that jumped higher as early as six months after the home purchase, said Phil Ruble, president of Olympic Mortgage in Grass Valley.

“Put those two things together, and you have a dangerous mixture,” Ruble said.

Applicants with poor credit and no down payment qualified for loans that stretched them to the limits of their income. Some expected to sell when prices rose even higher.

Then interest rates, which three years ago were at their lowest rates since the 1960s, started rising. The real estate market started slowing down.

Some adjustable loans with rates that started as low as 1.25 percent climbed past 10 percent by the time the home went into default.

“It just kills you,” Ruble said. “You can’t make the payments.”

With prices falling in some markets, some homeowners now owe more than their house is worth.

“So they just walk away,” Ruble said.

The demand for interest-only loans has not diminished. They still serve a purpose for responsible buyers, but qualifications such as higher credit scores have tightened access to such loans, Taber said.

Interest-only loans are tools to get some buyers into a home and have been used effectively by a number of people, Taber said. Those who neglected to do their

homework before they invested are the ones hurting now, Taber said.

“If you take a chain saw out and don’t know how to use it, you’ll be without a hand,” Taber said.

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To contact Staff Writer Laura Brown, e-mail lbrown@the union.com or call 477-4231.


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