California's default rate soars to 9.5%
The Los Angeles Times reports: 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 staggering number of home mortgage defaults probably will lead to large numbers of foreclosures through at least this year, housing experts say.
Mortgage defaults are more likely to result in foreclosure when borrowers owe more on their homes than they are currently worth -- commonly called being "upside down" or "underwater" in industry lingo.
Low interest rates are enabling many commercial borrowers to stay current on loans, but that's certain to change if rates rise, and a high percentage of office, retail and apartment buildings are already underwater.
"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."
View the full article on The Los Angeles Times: California's default rate soars to 9.5%
Posted by: Nina Turner