Those living in Southern California have likely noticed an increase in the number of Notice of Defaults being filed. Today, we’ll share three reasons for this trend.
If you live in Southern California, or own an investment property in this area, then you can expect to soon hear about an increase in the number of “Notice of Defaults” that are being filed. Coupled with the fact that our market is slowing down and that prices are dropping, you may see this development as an indication that we’re in a bubble. However, this isn’t the case.
These Notice of Defaults have nothing to do with the falling market. In fact, they’ve got much more to do with the rise in market activity we’ve observed over the last few years.
Seven or eight years ago, many people were modifying their first mortgages, but not their second. Instead, they simply stopped paying. They knew that, given the decrease in value and other factors, their second mortgage would not foreclose. Now, the tide has turned.
These same homeowners have since enjoyed strong appreciation, meaning their homes are worth more than they were when they purchased them. This is great, except for the fact that their second mortgage is still in play—and the lenders who loaned the funds now want their money. This is the first reason for the recent influx of Notice of Defaults.
The second reason is that the terms of their original loan modifications have expired, and these people can no longer afford the new, increased rates.
The third reason has to do with the Save Your Home California program—which paid the mortgages of 85,000 homeowners who had lost their job. This program is now over, meaning those who previously got by because of it have a renewed responsibility to pay their mortgages on their own.
As you can see, our market slowdown is not the reason for the increased number of Notice of Defaults.
If you have any other questions or would like more information, feel free to give us a call or send us an email. We look forward to hearing from you soon.