TRENDS IN DELINQUENCIES AND FORECLOSURES IN CALIFORNIA April 2009 Community Development Department, Federal Reserve Bank of San Francisco
Outline of Presentation National Trends Rising foreclosures House price declines Rising unemployment California Trends in foreclosure Housing market softening Rising unemployment Scale of loan modifications still falls short of need
National Trends
National Trends Foreclosures rose steadily in 2008, with wide repercussions for US economy After a slight decline in the national foreclosure rate in the 3 rd Quarter of 2008, rose again in 4 th Quarter Factors driving foreclosures nationally House price declines Rising unemployment, coupled with turmoil in financial and credit markets, may further influence foreclosure rate going forward
National Foreclosure Starts Rose Slightly in 4th Quarter of 2008 1.20 National Foreclosures Starts Percent of All Loans 1.00 0.80 0.60 0.40 0.20 0.00 2000 2002 2003 2004 2005 2006 2007 2008 Source: Mortgage Bankers Association, National Delinquency Survey, 4th Q 2008
Nationally, House Prices Continue to Decline 200 Case-Shiller National House Price Index (2000 = 100, quarterly) 180 160 140 120 100 2000 2001 2002 2003 2004 2005 2006 2007 2008 Source: Case - Shiller Home Price Index, 4 th Q 2008
Unemployment Rate Recession Marks Significant Jump in Unemployment U.S. Unemployment Rate 12 10 8 6 4 2 0 1989 1993 1997 2001 2005 2009 Recession Unemployment Rate Source: Bureau of Labor Statistics
California Trends
Foreclosures in California are Above the National Average 3 Foreclosure Starts (Percent of All Loans) 2.5 2 1.5 1 0.5 0 Alaska Washington Oregon Utah Idaho Hawaii US California Arizona Nevada 4Q 2005 4Q 2006 4Q 2007 4Q 2008 Source: Mortgage Bankers Association, National Delinquency Survey, 4 th Q 2008
Percent of All Loans Unlike National Trends, California Saw a Decrease in Foreclosure Starts in 4 th Quarter 2008 2.0 California: Foreclosure Starts 1.8 1.6 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0.0 2005 2006 2007 2008 Source: Mortgage Bankers Association, National Delinquency Survey, 4 th Q 2008
FHFA House Price Index 2000=100 California Has Seen Significant and Steep Decline in House Prices 250 FHFA (formerly OFHEO) House Price Index (2000=100, quarterly) California 200 United States 150 100 50 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 Source: Federal Housing Finance Agency (formerly OFHEO), 4 th Quarter 2008
FHFA House Price Index 2000=100 Northern CA MSAs Experiencing Significant House Price Declines 240 FHFA House Price Index: Northern California (2000 = 100) 220 200 Sacramento Oakland 180 San Francisco 160 140 120 100 2000 2001 2002 2003 2004 2005 2006 2007 2008 Source: Federal Housing Finance Agency (formerly OFHEO), 4 th Quarter 2008
FHFA House Price Index 2000=100 Central Valley Cities Have Seen Greatest House Price Declines 280 FHFA House Price Index (formerly OFHEO): Central California (2000 = 100, quarterly) 260 240 Fresno 220 200 Stockton 180 160 140 Visalia Merced 120 100 2000 2001 2002 2003 2004 2005 2006 2007 2008 Source: Federal Housing Finance Agency (formerly OFHEO), 4 th Quarter 2008
FHFA House Price Index 2000=100 Southern California MSAs also Experiencing Declining House Prices 280 260 FHFA House Price Index: Southern California (2000 = 100, quarterly) Inland Empire 240 220 San Diego 200 180 160 Los Angeles 140 120 100 2000 2001 2002 2003 2004 2005 2006 2007 2008 Source: Federal Housing Finance Agency (formerly OFHEO), 4 th Quarter 2008
Foreclosure Starts by Type (Percent of All Loans) California s Foreclosures are Concentrated in Subprime ARM Market 12.0 Foreclosure Starts by Loan Type 10.0 8.0 6.0 4.0 2.0 0.0 2005 2006 2007 2008 Prime Fixed Prime ARM Subprime Fixed Subprime ARM Source: Mortgage Bankers Association, National Delinquency Survey, 4 th Q 2008
Approximately 1 in 4 California Households Received a High Cost Loan during the Housing Boom 35% Percent of All Borrowers with High Interest Conventional Loans, 2005 30% 25% 22.7% 23.1% 23.6% 24.3% 25.9% 27.3% 28.0% 28.1% 29.2% 20% 20.4% 15% 10% 5% 0% Hawaii Alaska Oregon Washington Idaho California USA Arizona Utah Nevada Source: Home Mortgage Disclosure Act Data, 2005
High Cost Lending in California More Prevalent Among Minority Borrowers 70% California: High Cost Conventional Loans by Race, 2005 60% 50% 40% 30% 20% 10% 0% All borrowers White borrowers Asian/Pacific Islander borrowers Native American borrowers Hispanic/Latino borrowers Black borrowers Source: Home Mortgage Disclosure Act Data, 2005
Employment Rate Unemployment Rate in California on the Rise, May Affect Future Foreclosures 12 Unemployment Rate 10 8 6 California United States 4 2 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Source: Bureau of Labor Statistics, March 2009
Employment Trends by Industry in CA Total Employed (thousands) Percent Change California February 2009 1-mo.* 3-mo.* 12-mo. Total 14,534.8-9.1-7.3-4 Trade, Transportation & Utilities 2,742.5-6.7-6.9-5.5 Professional & Business Svcs. 2,164.8-15 -9.9-4.5 Educational & Health Srvs. 1,742.5 3 0.9 1.8 Leisure & Hospitality 1,533.5-10.9-5 -2.8 Manufacturing 1,355.4-13.1-12.3-6.2 Financial Activities 816.7-10 -7-6 Construction 681.9-41.2-25.7-18.5 Other Services 510.0-3 -3-1.2 Information 450.7 23.6-22.3-4 Government 2,508.6-1.5-1.3-0.3 Natural Resources & Mining 28.2-19 -2.8 0.4 Source: Bureau of Labor Statistics, February 2009; *Annualized.
Year-over-year percent change Significant Drop in Construction Employment 15 10 Industry Employment Growth: Construction (Year-over-year percent change, monthly) California 5 0 United States -5-10 -15-20 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Source: Bureau of Labor Statistics, March 2009
State & Local Data Maps
California Data Maps Lending Volumes September 2007 Source: Lender Processing Services Inc. Applied Analytics, September 2007
California Data Maps Areas Affected by Concentrated Foreclosures September 2007 Source: Lender Processing Services Inc. Applied Analytics, September 2007
California Data Maps Areas Affected by Concentrated Foreclosures April 2008 Source: Lender Processing Services Inc. Applied Analytics, April 2008
California Data Maps Areas Affected by Concentrated Foreclosures November 2008 Source: Lender Processing Services Inc. Applied Analytics, November 2008
California Data Maps Areas Affected by Concentrated Foreclosures February 2009 Source: Lender Processing Services Inc. Applied Analytics, February 2008
Bay Area Data Maps Neighborhoods Affected by Concentrated Foreclosures February 2009 Source: Lender Processing Services Inc. Applied Analytics, February 2009
Bay Area Data Maps Neighborhoods at Risk of Additional Foreclosures February 2009 Source: Lender Processing Services Inc. Applied Analytics, February 2009
Bay Area Data Maps Percent Concentration of Loans in of Foreclosure/REO Properties November February 2008 2009 Source: Lender Processing Services Inc. Applied Analytics, February 2009
Sacramento Valley Data Maps Neighborhoods with Concentrations of Foreclosures February 2009 Source: McDash Lender Processing Analytics & Services FRBSF Calculations, Inc. Applied Analytics, November February 2008 2009
Sacramento Valley Data Maps Concentration of REO Properties February 2009 Source: McDash Lender Processing Analytics & Services FRBSF Calculations, Inc. Applied Analytics, November February 2008 2009
Sacramento Valley Data Maps Areas at Risk of Additional Foreclosures February 2009 Source: McDash Lender Processing Analytics & Services FRBSF Calculations, Inc. Applied Analytics, November February 2008 2009
San Joaquin Valley Data Maps Neighborhoods with Concentrations of Foreclosures February 2009 Source: McDash Lender Processing Analytics & Services FRBSF Calculations, Inc. Applied Analytics, November February 2008 2009
San Joaquin Valley Data Maps Concentration of REO Properties February 2009 Source: McDash Lender Processing Analytics & Services FRBSF Calculations, Inc. Applied Analytics, November February 2008 2009
San Joaquin Valley Data Maps Areas at Risk of Additional Foreclosures February 2009 Source: McDash Lender Processing Analytics & Services FRBSF Calculations, Inc. Applied Analytics, November February 2008 2009
Southern Central California Data Maps Neighborhoods with Concentrations of Foreclosures February 2009 Source: McDash Lender Processing Analytics & Services FRBSF Calculations, Inc. Applied Analytics, November February 2008 2009
Southern Central California Data Maps Concentration of REO Properties February 2009 Source: McDash Lender Processing Analytics & Services FRBSF Calculations, Inc. Applied Analytics, November February 2008 2009
Southern Central California Data Maps Areas at Risk of Additional Foreclosures February 2009 Source: McDash Lender Processing Analytics & Services FRBSF Calculations, Inc. Applied Analytics, November February 2008 2009
Los Angeles Metro Region Data Maps Neighborhoods with Concentrations of Foreclosures February 2009 Source: Lender Processing Services Inc. Applied Analytics, February 2009
Los Angeles Metro Regional Data Maps Neighborhoods at Risk of Additional Foreclosures February 2009 Source: Lender Processing Services Inc. Applied Analytics, February 2009
Los Angeles Metro Region Data Maps Concentration of REO Properties February 2009 Source: Lender Processing Services Inc. Applied Analytics, February 2009
Inland Empire Regional Data Maps Neighborhoods with Concentrations of Foreclosures February 2009 Source: Lender Processing Services Inc. Applied Analytics, February 2009
Inland Empire Regional Data Maps Neighborhoods at Risk of Additional Foreclosures February 2009 Source: Lender Processing Services Inc. Applied Analytics, February 2009
Inland Empire Regional Data Maps Concentration of REO Properties February 2009 Source: Lender Processing Services Inc. Applied Analytics, February 2009
San Diego Regional Data Maps Neighborhoods with Concentrations of Foreclosures February 2009 Source: Lender Processing Services Inc. Applied Analytics, February 2009
San Diego Regional Data Maps Neighborhoods at Risk of Additional Foreclosures February 2009 Source: Lender Processing Services Inc. Applied Analytics, February 2009
San Diego Regional Data Maps Concentration of REO Properties November 2008 Source: Lender Processing Services Inc. Applied Analytics, February 2009
Number (Adjusted for Hope Now Servicers) Loan workouts reach approximately 55,000 borrowers each quarter 35,000 California Loan Workouts 30,000 25,000 20,000 15,000 10,000 5,000 0 Q3 2007 Q4 2007 Q1 2008 Q2 2008 Q3 2008 Q4 2008 Repayment Plans Loan Modifications Source: Hope Now Alliance Servicing Data, 4th Quarter 2008
Number (Adjusted for Hope Now Servicers) Yet, still more than 300,000 borrowers in California were seriously delinquent on their mortgage in 4 th Qtr 2008 350,000 Foreclosure & Delinquencies v. Loan Workouts in California 4th Quarter 2008 300,000 250,000 200,000 150,000 100,000 50,000 0 Serious Delinquencies Foreclosure Starts Foreclosure Sales Repayment Plans Loan Modifications Source: Hope Now Alliance Servicing Data, 4 th Quarter 2008
Conclusions
Conclusions Multi-pronged strategy is needed to stem foreclosure crisis Continued foreclosure prevention efforts are critical Foreclosure Prevention: Borrower Outreach, Refinance and Loan Modification (including principal reduction) Reaching these borrowers now may help to prevent unnecessary foreclosures Encourage borrowers to contact the Hope Hotline by calling (888) 995-HOPE or visiting www.995hope.org
Conclusions Other strategies that can help to mitigate the negative impacts of foreclosure on families and neighborhoods Addressing vacant properties: ensuring that servicers maintain properties REO property disposition: return REO properties into productive use, affordable housing Ensuring continued access to credit and homeownership: credit repair, financial education, responsible lending
For More Information: FRBSF Community Development Website Links to other resources and research on foreclosure trends and mitigation strategies All publications, presentations available on our website Conference materials also posted shortly after events http://www.frbsf.org/community/